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Petrol-diesel price gap decrease to hasten shift to petrol PVs: ICRA
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SME Times News Bureau | 08 Jul, 2020
A decrease in the gap between petrol and diesel prices is likely to
accelerate the shift towards petrol or CNG passenger vehicles in the
coming years, an ICRA analysis showed on Wednesday.
Accordingly, diesel PV's share is expected to decline to 15-18 per cent in FY2022 from 29 per cent in FY2020.
"Within
this, the share of diesel vehicles in the car segment will stabilize
around 5-7 per cent (from 11 per cent) whereas UV segment's share will
gradually reduce to sub 40 per cent (from 65 per cent) over the next 2-3
years," the report said.
"The entry-level segment (sub Rs 5 lakh
price segment) has almost entirely shifted to petrol or CNG, as it
doesn't make financial sense for an average car buyer to opt for diesel
vehicle."
According to the report, one key challenge in this
shift is the all important taxi segment which continues to account for a
sizable share of overall diesel vehicle sales; and government's
initiative to push clean vehicles (CNG or LPG or Hybrid) is yet to
completely materialise.
"Here, the ratings agency expects that
the CNG vehicles share will benefit at the expense of diesel share, as
the CNG variant already provides lower running cost per km compared with
diesel vehicles," the report said.
As per the report, there has
been an increase in upfront price differential of Rs 50,000 to Rs 70,000
post BS6 implementation which along with narrowing fuel price gap is
accelerating this shift.
"This apart, regulatory overhang like
ban on older diesel vehicles and push for CNG in commercial taxi segment
will dampen the demand for diesel vehicle in the medium to long term,"
the report said.
"The share of diesel vehicles has already
reduced to 29 per cent in FY2020 from 58 per cent in FY2013, and it will
further reduce to about 15- 18 per cent level in the next three years."
Besides,
the report said the CNG vehicles will mainly benefit from the shift due
to lower upfront cost and better cost economics than diesel vehicles.
"The
share of CNG vehicles, currently below 5 per cent in overall PV sales,
is expected to outperform other fuel segments in the medium term," the
report said.
"In line with the emerging trend, OEMs are
re-aligning their business strategy; some have exited from diesel
powertrain offerings and are instead focusing only on hybrids or CNG."
Currently, the small car segment is largely petrol-driven whereas the UV segment is diesel-driven.
In the luxury segments, the sales mix is tilted towards diesel cars.
Globally, China, USA, EU, Japan and India are top 5 markets volume-wise.
"Interestingly,
China and US, the world's top 2 automobile markets, have a negligible
share of diesel vehicles in the overall car sales," the report said.
"However,
diesel vehicles accounted for about 30 per cent and 29 per cent of new
PVs sold in EU and Indian market during FY2019 and FY2020 respectively."
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