Petrol car degrowth? Diesel cars to spur sales, says Maruti

India’s largest automaker, Maruti Suzuki , expects car sales to increase by 10 percent in the fiscal year beginning in April led by diesel models, its chairman said on Saturday.

[caption id=“attachment_255221” align=“alignleft” width=“380” caption=“Diesel car sales account for about 40 percent of new purchases in India, compared with less than 20 percent a few years ago. Reuters”]  [/caption]

Diesel car sales are expected to rise by 150,000 in 2012/13 while sale of petrol cars fall by 50,000, said the company, which is 54.2 percent owned by Japan’s Suzuki Motor Corp.

“The demand pattern has shifted drastically to diesel from petrol cars,” Chairman RC Bhargava told reporters.

“All indications are that petrol cars will show de-growth with news that another (petrol price) hike is around the corner.”

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Diesel sales have been helped by government subsidies which make them far cheaper than petrol models, even as overall demand growth has slowed due to rising interest rates and petrol prices.

Diesel car sales account for about 40 percent of new purchases in India, compared with less than 20 percent a few years ago.

The diesel model of Maruti Suzuki’s popular new Swift hatchback has a waiting list of more than six months.

Maruti aims to manufacture 150,000 diesel engines from its Gurgaon plant by mid 2013 and will invest Rs 950 crore to fund the capacity expansion.

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The company also said its engine capacity will increase by 300,000 by mid 2014 with an overall investment of Rs 1700 crore.

Maruti currently manufactures 300,000 diesel engines.

The carmaker’s focus on diesel cars has rendered 40 percent of its petrol engine capacity in its Gurgaon plant under-utilised, said M.M. Singh, head of production.

The company also aims to announce plans by the end of the first quarter of next fiscal year regarding the start of work on its facility in the western Indian state of Gujarat.

“Before the end of quarter one we will make a clear announcement of when we need to start work in Gujarat,” Bhargava said.

Overall car sales in India will likely post only marginal growth in the fiscal year that ends this month. They are expected to grow by more than 10% in the coming fiscal year, driven by increased salaries and a rapidly growing middle class.

“We are in the process of negotiating salaries with employees,” Bhargava said.

Labour strikes brought the company’s factories to a standstill last year as it grappled with an industry wide slowdown, hurting its dominant market position.

Shares of Maruti are up 42.3 percent since the start of 2012, compared with a 12 percent rise in the main index.

Reuters