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Old 19th July 2011, 11:06   #1
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Arrow Diesel craze sends carmakers scurrying for diesel engines

Diesel craze sends carmakers scurrying for deisel engines

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Caught on the wrong foot by the sudden surge in demand for diesel cars, automakers have started going into an overdrive to ramp up capacity for manufacture of diesel power trains.

Ford India recently admitted it was facing supply constraints in diesel powertrains.

“The new market scenario is in favour of diesel cars. The vendors are genuinely trying to supply components. However, we cannot get enough. Orders are more than supply,” Nigel Wark, executive director, marketing, sales and services, Ford India said at the launch of the new Ford Fiesta recently.

Ford India has a capacity to manufacture 250,000 engines a year at its Chennai plant and offers diesel variants on its Figo, new Fiesta, and Fiesta Classic models.

“There has been an aggressive growth in demand for diesel vehicles in less than six months. Customers are waiting longer for getting a diesel car. There is currently a gap of around 4-5 weeks between a diesel and a petrol car. It is important for us to ramp up our diesel supplies as quick as possible as we see demand moving positive during the festival season,” said Wark.

The situation is no different for Maruti Suzuki, India’s largest passenger carmaker. According to Shashank Srivastava, chief general manager, marketing, Maruti Suzuki, “around 10 months back, only 60% of the demand came for diesel vehicles. But today the demand has moved to 80%. This is happening due to increase in price difference between diesel and petrol. The gap has been widening. Our petrol vehicles are available, while there is a waiting period of 3-4 months for diesel cars like Swift, Dzire, Ritz and SX4.”
According to Srivastava, the difference in waiting period is mainly due to constraints on the engine side as the demand has been too “sharp and sudden.”

Maruti Suzuki currently manufactures 250,000 diesel engines a year under Suzuki Powertrain India Ltd. The company is planning to ramp up the production of diesel engines considering the shift in demand.
“With new Swift coming in, we expect the demand for its diesel variant to remain significant. Hence we will have to ramp up our diesel engine production,” said Srivastava, but did not reveal how much the company plans to ramp up going forward.

Diesel cars are finding favour mainly because of rising petrol prices, widening the gap between the waiting periods of the two variants. The disparity in the pricing of diesel and petrol — with diesel subsidised more than petrol and therefore much cheaper — has forced the shift.

“There is a sudden growth in diesel demand due to hike in petrol prices. It’s a very short-term reaction shown by the customers. Currently, the number of models in the petrol cars in much higher than the diesel cars, especially in the B segment, which currently dominates the car market. There is a huge pressure on manufacturers to maintain a balance between both considering the shift in demand towards diesel,” said V G Ramakrishnan, director, Frost & Sullivan.
Most auto players, including Maruti Suzuki, Ford, General Motors have in-house engine manufacturing facilities.

According to experts, a lot of components for diesel power trains are currently being imported. One of the critical parts, the fuel injector, is mainly supplied by Bosch India.

“With demand being so uncertain, it is difficult to place a order for imported materials. Apart from this, manufacturers are still not convinced whether the demand for diesel will remain as it is going ahead. There has to be a steady growth in demand before companies decide to ramp up,” said Ramakrishnan.

Meanwhile, General Motors, which is expected to launch a diesel variant of its small car Beat this month, says it has enough capacity to meet demand. “We have commissioned a powertrain plant at Talegaon having an annual capacity of 160,000 engines (petrol and diesel) of up to 1.5 litre capacity,” said P Balendran, vice-president (corporate affairs).

URL of the article: Diesel craze sends carmakers scurrying for deisel engines - Money - DNA
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Old 19th July 2011, 11:11   #2
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Default Re: Diesel craze sends carmakers scurrying for deisel engines

Nice find there RemingtonSteele. Indeed, the manufacturers have gone berserk on diesel powerhorses. Thanks to the regularised diesel prices, most of us have also shifted loyalties. Manufacturers are only cashing in on the craze!

Is Honda reading this?
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Old 4th August 2011, 13:57   #3
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

Just saw this on cnbc-tv18

Sourced from Stocks in news: GTL, DLF, Acropetal, Coal India, Delta Corp - CNBC-TV18 -
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Finance Ministry sources
-Hike in excise duty on diesel run cars also being considered
-3-Tier excise hike on diesel cars may be looked at
-Rs 20,000-`50,000 & Rs 70,000 depending on size of car

-Final decision in consultation with the PM
-Hike unlikely if economy starts looking up & revenues improve

Last edited by echo77 : 4th August 2011 at 14:21.
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Old 4th August 2011, 14:20   #4
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

Now things may cool down. The FM has hinted at additional taxes of Rs.20,000 to 70,000 on each Diesel car in Parliament. I do not think dual pricing of fuel will be feasible.
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Old 4th August 2011, 15:48   #5
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

Will the news below put brakes on the diesel craze to car-owners?

Car owners may not get subsidised diesel: Government - The Economic Times

Last edited by volkman10 : 4th August 2011 at 15:58.
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Old 4th August 2011, 15:57   #6
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Originally Posted by volkman10 View Post
Will the diesel craze continue with now proposal to withdraw subsidiy to car-owners?

Car owners may not get subsidised diesel: Government - The Economic Times
I think the modalities of doing this would take far fair bit of doing. What could happen faster is that hike in the excise duty of diesel engines. Meantime I guess the motto would be - 'make hay while the sun shines.'
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Old 4th August 2011, 17:18   #7
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Now things may cool down. The FM has hinted at additional taxes of Rs.20,000 to 70,000 on each Diesel car in Parliament. I do not think dual pricing of fuel will be feasible.
This is exactly what the Industry is worried about. They've (SIAM) been trying to convince the Govt. of the virtues of modern diesel engines and how efficient and less polluting they are compared to Petrol Engines.

Govt. would be in a fix really. One the one hand they don't want the diesel subsidy to be enjoyed by luxury car owners, on the other hand they don't (should not at least) want to make policies that discourage people from buying diesel cars as it is clearly more efficient than Petrol cars and helping to bring down the country's import of crude.
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Old 5th August 2011, 08:21   #8
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Originally Posted by sgiitk View Post
Now things may cool down. The FM has hinted at additional taxes of Rs.20,000 to 70,000 on each Diesel car in Parliament. I do not think dual pricing of fuel will be feasible.
In short term , this announcement will push the demand for diesel cars more and thus pressurizing the car makers further to meet that demand. what they are trying right now is a knee jerk reaction. Govt own greed for more revenue's without putting a direct tax on individual is not letting them sleep peacefully.

Dual pricing is impossible in india. this will only impact their revenues and a jump in more black money flowing in market.
are we sure that private car owners are using 15 % of the total diesel yearly. what are the basis of this figure. any help will be appreciated. i think that 15% is inflated by govt to justify their actions.

Last edited by .sushilkumar : 5th August 2011 at 08:22.
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Old 5th August 2011, 10:10   #9
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Originally Posted by Santoshbhat View Post
This is exactly what the Industry is worried about. They've (SIAM) been trying to convince the Govt. of the virtues of modern diesel engines and how efficient and less polluting they are compared to Petrol Engines.

Govt. would be in a fix really. One the one hand they don't want the diesel subsidy to be enjoyed by luxury car owners, on the other hand they don't (should not at least) want to make policies that discourage people from buying diesel cars as it is clearly more efficient than Petrol cars and helping to bring down the country's import of crude.


You have made some very valid points. I really do not think the FM is listening though. In the larger picture as you have said diesel being inherently more efficient (more kmpl) will actually help bring down the total quantity of crude import.

I wish the government had some real thinking heads.
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Old 5th August 2011, 10:18   #10
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Originally Posted by .sushilkumar View Post
1. Dual pricing is impossible in india. this will only impact their revenues and a jump in more black money flowing in market.
2. are we sure that private car owners are using 15 % of the total diesel yearly. what are the basis of this figure. any help will be appreciated. i think that 15% is inflated by govt to justify their actions.
1. An arbitrage opportunity for our netas/ babus/ pumpwallahs. Elections are round the corner.
2. I also have my doubts, esp. since many buyers (esp in the South) drive well under 10,000km a year but have opted for Diesels.
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Old 5th August 2011, 11:25   #11
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Originally Posted by .sushilkumar View Post
are we sure that private car owners are using 15 % of the total diesel yearly. what are the basis of this figure. any help will be appreciated. i think that 15% is inflated by govt to justify their actions.
This is the number one question on everybody's mind.

How did they come to that figure - even if we consider all the taxi(s) plying all over the country, I'm not really sure if this figure would be reachable!

And having been part of the largest telecom towers organization, I have an idea of the immense amount of diesel these towers consume - we were the number two diesel consumption org in the country, after the railways!

I wonder under which division did the fin ministry put such organizations. Industry? That's just a measly 10%.

Really can't believe the breakup percentage figures!

Last edited by ninjatalli : 5th August 2011 at 11:26. Reason: spelling errors
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Old 5th August 2011, 12:40   #12
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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This is the number one question on everybody's mind.

How did they come to that figure - even if we consider all the taxi(s) plying all over the country, I'm not really sure if this figure would be reachable!

And having been part of the largest telecom towers organization, I have an idea of the immense amount of diesel these towers consume - we were the number two diesel consumption org in the country, after the railways!

I wonder under which division did the fin ministry put such organizations. Industry? That's just a measly 10%.

Really can't believe the breakup percentage figures!
I think SIAM puts the figure at something like 5 or 6%. The diesel consumed by cars i.e. Statistics are always manipulated, be it the Govt. or the concerned industry to justify their actions or proposals.

Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital. ~Aaron Levenstein


Other industries are also consuming subsidised diesel a lot. Many states are facing power shortage resulting in load shedding . As a result diesel generators have almost become compulsory. These gensets consume huge amounts of diesel. Even with susidised diesel, the cost per unit is almost 2 or 3 times the cost of power supplied by the electricity boards.
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Old 5th August 2011, 13:33   #13
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

Contrary of fellow bhpians, I agree somewhat with the govt. proposal to remove subsidies for diesels for car-owners. Why?

When the government subsidizes fuels, the entire economy bears the costs while the benefits often go to the undeserving. Thus it is a fallacy to think that subsidized fuel is cheap. A higher subsidy burden plays havoc with the government's finances. The government then responds by either levying more taxes or borrowing more. Higher government borrowings crowd out private-sector borrowings (the latter are unable to borrow as much as they would like to). They also exert upward pressure on interest rates, thereby making capital more expensive. Many projects (corporate capex plans as well as infrastructure projects) are then rendered unviable. When corporates don't expand capacity, all of us pay the price in terms of higher costs of manufactured goods. And poor infrastructure is only too evident at every turn in our daily lives for me to belabor its significance here.

The positive aspect of having market-linked prices is that actual users bear the brunt of higher prices. Yes I may be scorned at but if we citizens can afford the luxury of driving cars, sustaining better lifestyles (atleast when compared to our parents generation), earning better pay than what our parents did at our age then I don't think shelling out a few more bucks for gas (petrol or diesel) should be condemned.

My thoughts was already posted at http://www.team-bhp.com/forum/indian...ml#post2437012 (Is this the beginning of the end of the petrol car?) (if you want to read)

I do however think the implementation would be a challenge as an inappropriate implementation would not only lead to rampant corruption but also a flourishing black economy masquerading under the guise of revenue collection
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Old 5th August 2011, 18:44   #14
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

Different pricing of diesel is not going to be possible simply because it is difficult to differentiate between truck diesel and car diesel. Or more simply since diesel is a commodity that can be used alike.

Now increasing the duty on diesel engined cars could be done but if the price difference in going to be any higher than what it is that would be negated.

The basis of the discussion is more because there is a difference in the price difference between petrol and diesel which should not be the case.
The government should not consider the price of diesel as a measure to control the prices of other articles in the country.

Government should keep the price of both the petrol and diesel where it actually belongs and keep the intervention to the bare minimum and leave the market forces to play their course.
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Old 5th August 2011, 19:27   #15
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Default Re: Diesel craze sends carmakers scurrying for diesel engines

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Originally Posted by sgiitk View Post
1. An arbitrage opportunity for our netas/ babus/ pumpwallahs. Elections are round the corner.
2. I also have my doubts, esp. since many buyers (esp in the South) drive well under 10,000km a year but have opted for Diesels.
I totally agree with you on this one. Diesel cars should be used by people who really need them. One way to put these people off is by increasing the taxes of diesel cars over petrol to just the right extent.

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Originally Posted by figo_mba View Post
Different pricing of diesel is not going to be possible simply because it is difficult to differentiate between truck diesel and car diesel. Or more simply since diesel is a commodity that can be used alike.

Now increasing the duty on diesel engined cars could be done but if the price difference in going to be any higher than what it is that would be negated.

The basis of the discussion is more because there is a difference in the price difference between petrol and diesel which should not be the case.
The government should not consider the price of diesel as a measure to control the prices of other articles in the country.

Government should keep the price of both the petrol and diesel where it actually belongs and keep the intervention to the bare minimum and leave the market forces to play their course.
It is difficult to do that in a country like ours. Inflation will rocket up and the end user will be affected - not the rich person but the poor man. While what you say will be difficult to implement in one stretch, yet it can be done in a phased manner so that petrol and diesel fuels eventually cost the same.
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