Toyota to stop selling small diesel vehicles in India post BS VI

Japanese automaker Toyota – which operates in the Indian market through a joint-venture with the Kirloskar Group, Toyota Kirloskar Motor (TKM) - is looking at stopping sale of small diesel vehicles in the country post the transition to BS VI emissions standards.

While the company will continue to offer diesel fuel options in larger utility vehicles Innova and Fortuner, it will discontinue the 1.3 litre diesel engine it currently has strapped on the Etios, Etios Cross, Liva and Corolla Altis.

A senior industry executive in know of the development, “While the Etios series is at the end of its lifecycle, Toyota will discontinue the diesel version of the Corolla Altis as the cost economics of the product after transition to BS VI emission standards will not be viable for the consumer.”

“Globally, Toyota is moving on with hybrid technology in the Altis. In the Indian market additionally, the executive sedan segment has shrunk to around 500-600 units per month. The volumes and the cost economics do not merit upgrading the diesel engine to higher emission norms”, said a second person in know who did not wish to be identified.

In response to a query from ET, N Raja, deputy managing director, TKM, said, “We still see demand for diesel variants, and will continue to manufacture them till the future technology sets in.” Diesel vehicles currently account for 85% of volumes in the company. Toyota Kirloskar Motor sold 99,979 vehicles between January and September 2019. But more than 60% of the sales came from utility vehicles Innova and Fortuner, where the company would continue to have diesel-driven options.

The decision to stop sale of small diesel vehicles, on account of an unviable increase in cost upon switchover to enhanced emission norms, mirrors those of market leader Maruti Suzuki and French carmaker Renault who too have announced plans to discontinue such models. New entrant MG Motor India also has said it would only make sense for the company to offer diesel fuel options in vehicles priced over Rs 15 lakh post migration to BS VI standards.

V G Ramakrishnan, managing partner at Avanteum Advisors LLP, explained in the hatchback segment, prices of diesel vehicles are likely to go up by 20-25% post implementation of BS VI norms. The break-even period for purchasing a diesel vehicle would increase by 2.5-3 years, negating the benefits of increased mileage that the fuel currently offers. “It will not make economic sense for consumers at the entry-level to purchase diesel vehicles…Diesel would continue to find favour among buyers for premium sports utility vehicles where the percentage of vehicle price increase on account on BS VI would be less than 10%”, he informed.

Already, demand for diesel vehicles has been on a wane in the local market since the fuel was deregulated by the government in 2014. With the price differential between petrol and diesel narrowing to around Rs 10, the share of diesel vehicles in overall passenger vehicle sales fell to 33% in September 2019, down from a peak of 58% seen in 2012-13.

Prices of diesel vehicles are likely to increase 15-20% due to the implementation of BS VI norms, confirmed TKM. “In the future customers will ultimately decide which powertrain will succeed depending on cost, environment friendliness and sustainability. We will continue our concerted efforts leading the way to the future of mobility and build ever better cars and communities in harmony with nature through sustainable approaches in coordination with all stakeholders like OEMs, suppliers, vehicle users, mobility providers, financial services and government”, informed Raja, adding, “We will continue to be in diesel as long there is a demand from the customers and next technology innovations begins.”