Pune: Maruti Suzuki, India’s largest car maker, in a biggest announcement on Thursday said it would stop making diesel cars beginning April next year and forecast a weak rate of growth for the current fiscal year, blaming uncertain fuel prices and the onset of stricter BS VI emission norms.
The company will need to invest in upgrading its technology, including for diesel cars, to meet the country’s stricter emission norms that come into effect next year.
In fact, from April 1, 2020 when the new BS VI emission norms kick in, Maruti Suzuki’s diesel engines will not be ready to meet the more stringent emission norms.
Also, the high cost of upgrading existing diesel engines to the BS VI norms forced the company, which sells one car out of two bought in the country, to take such a decision.
At present, more than half of Maruti Suzuki passenger vehicle range has a diesel engine option. Models that had a diesel engine include the Maruti Suzuki Swift, Dzire, Baleno, Ertiga, Ciaz, S-Cross and the best selling Vitara Brezza.
Diesel cars constitute about 25 to 30 per cent of all Maruti Suzuki sales. But the company will try to focus on compressed natural gas (CNG) and hybrid technology driven vehicles to compensate the vacuum created by the phasing-out of diesel vehicles.
“From April 1, 2020 we will not be selling diesel cars in the country,” RC Bhargava, Chairman of Maruti Suzuki, told reporters at a press conference in New Delhi.
He said the company will phase out all diesel cars from its portfolio with effect from April 1, 2020.
Bhargava said substantially higher development cost will make diesel car a non-viable option for price-conscious consumers.
“We have taken this decision so that in 2022 we are able to meet the Corporate Average Fuel Efficiency norms, and higher share of CNG vehicles will help us comply with the norms. I hope the Union government’s policies will help grow the market for CNG vehicles,” he said.
Bhargava also said he expected production and sales to grow between 4 and 8 per cent for the ongoing financial year. Last year, it sales grew by just 6.1 per cent.
While Maruti Suzuki’s growth forecast is in sync with the broader industry outlook, high levels of discounting by Maruti had resulted in disappointing quarterly margins.
The company also said it has earmarked a capex of Rs 4,500 crore for the current fiscal.
On Thursday the company reported a 5 per cent year-on-year de-growth in March quarter profit, dented by weak operating performance and muted sales volume.
The New Delhi-based firm’s net profit during the quarter fell to Rs 1,795.6 crore, down from Rs 1,882.1 crore clocked in same period last year.
Standalone revenue from operations grew by 1.4 per cent year-on-year to Rs 21,459.4 crore in Q4 with sales volume de-growth of 0.7 per cent year-on-year.
The company sold 4,58,479 vehicles during the quarter.
