Indian carmakers see future in small diesel engines

Maruti Suzuki, Hyundai, Honda, and Tata Motors are placing their bets on compact diesel cars to drive sales growth in India.
Even as sales of small cars declined 13% in the last financial year, leading carmakers are exploring options to develop or add diesel engines with smaller engine capacity to power vehicle sales in the category.
Japanese automakerHonda, which launched its first major entry in the Indian market with its diesel-powered entry-level sedan, the Amaze, in April, is looking at developing a smaller diesel engine to power small car sales in emerging markets. The diesel engines, 1 liter and 1.2 liters, once developed would be the smallest for Honda globally.
Atsushi Arisaka, chief engineer of large project development, Honda R&D (Asia Pacific), had recently said, “We are looking at developing a smaller diesel engine….” While Arisaka declined to specify a timeline for the launch, company sources say it usually takes two or three years from the start of a project to come out with the final product.
Honda’s initiative could throw a major challenge to heavyweights such as Maruti Suzuki and Hyundai, which have maintained dominance in the small-car market in India for over a decade. At present, Maruti Suzuki, with over half-a-dozen models from the M800 to the Swift, commands a 48% share in the compact car category. Hyundai, the Korean automaker, has a market share of 22%.
Maruti Suzuki sources its 1.3-liter diesel engine from Fiat. Hyundai’s i20 is powered by a 1.4-liter diesel engine. Both are reportedly working on bringing smaller diesel cars to the Indian market, where 58% of new car sales are in the diesel category. Tata Motors, too, has been mulling over the launch of a diesel version to beef up Nano sales.
Hyundai is scheduled to develop a new compact car powered by a 1.1-liter diesel engine. Maruti Suzuki, in the meantime, is reportedly working on a range of diesel engines in the 1-liter to 1.4-liter engine range with parent Suzuki Motor Corporation in Japan to power its vehicles in India.
Deepesh Rathore, managing director of advisory firm IHS India, says, “[A] diesel powertrain makes a lot of sense in the A (small car) segment. There is not much competition and whoever comes out earliest with such a product would have an advantage as consumers in the category are particularly demanding in terms of fuel efficiency.”
Both Hyundai and Honda have ruled out introducing diesel engines in existing products in their portfolio. Even as the market was abuzz with rumors of Hyundai strapping its 1.1-liter diesel engine on to the i10, the company has chosen instead to develop a new compact car which is expected to hit the roads in the second half of this financial year.
In the last financial year, while sales of diesel vehicles increased by 27%, the demand for petrol cars declined by 17%. Diesel demand has been growing rapidly since the government decontrolled petrol in June 2010.
(May 7, 2013)