Sunday, October 1, 2023

The Future of Dominance of Diesel Vehicles in the Automobile Sector

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Diesel is a significant industry globally. The usage of diesel in passenger vehicles is almost as frequent as gasoline-based engines in most countries. Moreover, sales are increasing globally despite recent pollution issues involving vehicles from many major automobile brands.

Data & Statistics Describing the Indian Logistics Sector

Except for entry-level mini vehicles and hatchbacks, more than 50% of all passenger vehicles in India are powered by diesel. However, as more first-time vehicle purchasers joined the Indian market, the diesel share of the hatchback market fell from 46% to 34% in 2016. Trucks are the major cargo transportation source, requiring more diesel. However, there are fuel-efficient trucks available in the market, such as Mahindra Jayo.

The entry-level micro automobile or auto-rickshaw is the only industrial sector where diesel-powered vehicles hold less than 30% of the market share. Mini automobiles, auto rickshaws, tuk-tuks, and moto-taxis are frequently the major mode of transportation in developing nations to navigate highly populated metropolitan areas.

India had an image of an extremely filthy and smog-filled country. Consequently, the SC of India in 1998 gave instructions to the Delhi government to utilise Clean Natural Gas or Liquid Propane as the primary fuel for all buses and official vehicles.

The ruling also mandated the use of catalytic converters, the use of leaded fuels, the pre-mixing of 2T oil for lubrication in all motors, the phase-out of older polluting vehicles, the reduction of benzene content in fuels, and the requirement that all new vehicles adhere to the Euro-II Pollution Standards of 2000. There are many models following these requirements, such as the Mahindra Supro.

Significance of Fuel-Efficient Vehicles in the Logistics Sector

By 2021, transportation will account for 81% of diesel use, up from 70% in 2013. Diesel use by trucks and buses increased from 38% in 2013 to 62% in 2021. Creating clean and fuel-efficient automobiles is crucial as more vehicles join the market. Long lines of auto-rickshaw drivers had to wait initially to purchase CNG, but as time passed, fueling stations changed. Eventually,  other Indian state governments made similar regulations and air quality started to improve.

Some municipal and state governments have prohibited older two-stroke engines in favour of four-stroke ones or are in the process of doing so. An auto-rickshaw driven by petrol typically achieves 82 miles per gallon. 

Role of Diesel & Diesel-Based Vehicles in the Logistics Sector

Based on the oil ministry’s $94 per barrel diesel pricing for April, the diesel market in India is worth $60 billion, excluding transportation expenses, taxes, margins, and levies.

In FY23, a record-breaking 86 million tonnes of fuel were sold. According to figures from the oil ministry, the business last fiscal year increased by 12% over the previous year.

Diesel continues to rule every other market category except for the tiny vehicle.  Engines based on diesel outsold petrol engines by 3% to 4% between 2015 and 2016. Diesel has an incredible amount of market share in higher price point categories. The usage of diesel is vast in the great majority of pricey vehicles.

The fuel efficiency of diesel makes it a popular choice for commercial vehicles, including both cargo and passenger transportation. Larger vehicle owners in India typically commute vast distances and reside outside major cities.

Reducing gasoline expenses makes financial sense. Although a diesel-powered vehicle costs more upfront than gasoline-powered vehicles, it will save you a lot of fuel throughout its lifespan.

How Does Major Brands Choosing to Go with Diesel Affect the Sector?

Similar to the premium commercial vehicles industry, the mid size sedan market is dominated by diesel. According to estimates, higher-end sedans account for 66% of the market share, while lower-end sedans account for 56%.

The top-end luxury vehicles from major automobile brands are virtually entirely diesel-powered. As a result, diesel fuel accounts for roughly 96% of premium vehicles.

Diesel & Diesel-Based Vehicles from an Economic Point of View

Price points for entry-level microvesicles and hatchbacks are significantly lower than those for diesel-powered vehicles. This is because the customer group tends to reside in big cities and is more price-conscious.

The folks frequently purchase their first vehicle. Since they travel shorter distances regularly than individuals who commute from outside the city, these smaller vehicles utilize petrol rather than diesel. The demands of this market niche may be more than adequately satisfied by a little rickshaw or micro automobile, which can still get 60-90 mpg.


India is the only major mass market outside Europe where diesel is more widely available than petrol. However, Delhi declared a ban on diesel engines 2 liters and bigger in the city in December 2015, bypassing the 4-year phasing-out timeframe.

Under pressure from major automakers, the ban was repealed in August 2016, and a mutually agreed-upon 1% levy on diesel vehicles was implemented. According to Price Water house Coopers, the difference in pricing between diesel and petrol is (Rs)1 lakh. So if diesel or petrol will rule India, only time will tell.

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