Carmakers will be hit by India's ban on new luxury diesel vehicles

India's Supreme Court has banned new luxury diesel vehicles in Delhi as it tries to curb pollution, marking a warning sign to India's car industry mover a growing backlash against diesels, particularly larger, heavy SUV's which are popular with the wealthy. About 90% of SUV's and other utility vehicles sold last year were fuelled by diesel, including many German-made luxury cars, as it is substantially cheaper than petrol. This ban will impact Mahindra & Mahindra's Scorpio, Tata Motors' Safari and Sumo, Toyota's Innova, Mitsubishi's Pajero, along with models from Mercedez-Benz, BMW and Audi. 

Delhi had guzzled 11.32 lakh tonnes of diesel in 2013-14 alone, 39.6 per cent more than the 8.11 lakh tonnes it consumed just four years ago. Delhi had guzzled 11.32 lakh tonnes of diesel in 2013-14 alone, 39.6 per cent more than the 8.11 lakh tonnes it consumed just four years ago.

The Supreme Court’s ban on the registration of new diesel vehicles just on Wednesday morning has already set off a massive debate on two fronts: just how bad diesel is, and why should vehicles take the blame for the impact of diesel on Delhi’s air quality?

First the facts. Delhi had guzzled 11.32 lakh tonnes of diesel in 2013-14 alone, 39.6 per cent more than the 8.11 lakh tonnes it consumed just four years ago. Policy experts and scientists, including the SC appointed EPCA have repeatedly pointed out that the spike in the use of diesel from 2007-08 actually mitigated the gains made in Delhi’s air quality when it converted public transport to CNG. In the late 1990s, diesel-fuelled vehicles constituted only four per cent of the total car sales in Delhi, the EPCA recorded in a 2007 report, adding that the number had reached 24 per cent in 2006. Today, diesel cars account for almost half of total sales in Delhi and NCR.

The reason for this was the sharply diminishing gap between the cost of CNG and diesel. In June 2010, the cost of a litre of diesel was Rs 40.10, and CNG Rs 27.50 per kg. Today, diesel costs Rs 48.26 a litre and CNG Rs 37.55 per kg. The EPCA told the SC in a report last year, “In 2002-03, CNG was cheaper than diesel by about 46.71 per cent. Between 2004 and 2009 the difference widened further to more than 50 per cent as diesel prices increased… In December 2013, the price differential (had) plummeted to 7.35 per cent,” the report said. “High CNG costs hurt public transport and undermine (the) clean fuel program,” it added.