Steady revival in car sales notwithstanding, market leader Maruti Suzuki has warned that imposition

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of additional taxes on diesel cars may lead prospective car buyers to the extent of not buying a car at all. With diesel cars getting dearer, customers may shift preference to petrol cars, but only by a small proportion due to high prices of petrol fuel, according to the carmaker.

“The rate of decline in petrol cars is reducing but industry (sales) will be impacted. If additional taxes are levied on diesel cars, a buyer may buy a petrol car or decide to not buy a car at all. The latter might happen if the buyer feels he has been without a car for so long, and he can do without it in the future as well,” said Mayank Pareek, managing executive officer (marketing & sales), Maruti Suzuki India.

The industry is abuzz with reports of imposition of an additional excise duty on diesel cars of up to Rs 80,000 in the budget to be presented by finance minister Pranab Mukherjee next month. If the new taxes are imposed, it would widen the price gap between petrol and diesel variants of a specific car model. At present, diesel variants are the preferred choice for consumers because they are 50 per cent more fuel-efficient than petrol variants as well as cost about 30 to 40 per cent lesser to tank-up at fuel pumps than petrol cars.

“In the current financial year till January, net addition of diesel cars to the industry has been about 1.08 lakh cars with reduction in sale of petrol cars by nearly the same number. Last year, diesel cars formed 60 per cent of the cars that we sell in both petrol and diesel variants. This year, the percentage has increased to more than 80 per cent,” Pareek added. While diesel cars formed about 31 per cent of industry’s 2.52 million cars sold last year, so far this year the proportion has already increased to above 40 per cent, according to Maruti Suzuki.

Sales of small cars that run on petrol including popular models Alto and Santro slumped 12 per cent to 437,229 cars between April and December 2011 compared with 494,895 in year-ago period, according to Siam data. Pareek said diesel cars are cost-beneficial over a period of five years for those who have a monthly running exceeding 1,500 kilometers. “Some buyers have less monthly usage but still buy diesel cars. The main trend seen with Indian customers is that they want to spend less during every visit to fuel pump but are ready to pay higher capital initially to purchase a car,” Pareek added.