Maruti, Ford confirm buyer shift to diesel hatchbacks

On Monday, we put out a story that argued there was a big shift in buyer preferences in the hatchback market. A CarToq analysis of the sales figures since January this year showed that petrol-only models (Alto, Wagon R, Santro, Nano) were losing ground to models that had both diesel and petrol options (Swift, Indica).

The analysis showed that hatchback models with petrol-only options that sell over 5,000 cars a month (Maruti Alto, Hyundai Santro, Maruti Wagon R, Hyundai i10 and Tata Nano), saw a decline in sales by 17.5% in the first five months this year. These hatchbacks account for more than 50% hatchback sales in the country.

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At the same time, Swift sales shot up by 20% in May over April sales, and it overtook the Wagon R to occupy the number 2 spot in hatchback sales. This is the first time that the Swift, which has both diesel and petrol options has outsold the Wagon R. Indica, which also has a strong diesel offering, did well too with a 29% sales jump in May over April. Read the full analysis here.

So we asked the leading hatchback manufacturers whether there was indeed a big shift underway.

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“Nearly 70 percent of our sales of the Swift and Ritz are in favor of the diesel variant.”

– Mayank Pareek, Managing Executive Officer, Maruti Suzuki India Limited

“We can’t give you exact sales figures for the diesel and petrol Swifts separately, but what we are seeing is that nearly 70 percent of our sales of the Swift and Ritz are in favor of the diesel variant. That’s why we have a waiting period on these models as well, as there’s huge demand,” says Mayank Pareek, managing executive officer, Maruti Suzuki India Limited.

Pareek says he sees this trend continuing especially after the recent hike in petrol prices and Maruti too is focusing on diesel variants for its cars.

Maruti is not alone. Ford also sees a significant shift in buyer preference towards the diesel variant of the Ford Figo. The Ford Figo comes with two engine choices – a 1.2-litre, 70-bhp petrol and a 1.4-litre, 68-bhp diesel engine.

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“This year we’ve seen demand go up to 70 percent in favour of diesel.”

– Nigel E Wark, executive director, marketing sales and service, Ford India

CarToq asked Nigel E Wark, executive director, marketing sales and service, Ford India, about how the Figo has been affected.

Says Wark, “Last year, taking both the Fiesta and the Figo, we had a 55 percent mix in favour of diesel, but this year we’ve seen demand go up to 70 percent in favour of diesel.” That is clearly a significant shift among Ford buyers’ preferences.

A 70:30 split in favor of diesel is indeed a sharp shift among buyer preferences of Maruti and Ford hatchbacks.

The buyer logic is not hard to understand. Present day diesel engines are nearly 20 percent more fuel-efficient than their petrol equivalents, and diesel fuel prices are 68 percent less than petrol. These big cost savings are more than enough to offset the higher price for diesel cars (by about 15-20 percent).

The total cost of ownership (fuel costs, better mileage, EMI on loan) for diesel cars in most cases works out to be lower than petrol cars. (Use the CarToq Diesel Decider for comparative options between diesel and petrol options that you might be considering.)

Maruti and Ford have an aggressive price strategy for its diesel offering to fully leverage the diesel cost effectiveness. Hyundai is also seeing a similar demand in Verna bookings (which is not a hatchback) though the i20 sales split is till 75:25 in favour of petrol model.

The Hyundai i20 sells 11 variants in the Indian market, which includes five diesel variants. Prices for the diesel variants start at Rs. 5.75 lakhs onwards, while the petrol variant starts at Rs. 4.7 lakhs.

Rajiv Mitra, general manager, corporate communications, Hyundai Motor India Limited says in the i20 demand mix there is no big shift to diesel. “We see about 25 percent of i20 sales as diesel, while the rest are petrol. We aren’t seeing that much of a shift with the i20 at least,” says Mitra, “but when we look at bookings for the Hyundai Verna, the majority is for the diesel version.”

There is clearly demand for low-capacity, small and fuel-efficient diesels in India. General Motors is planning to capitalize on this buyer shift with the launch of a 1-litre diesel engine in the Chevrolet Beat in July. According to speculative reports, the Beat diesel would put out about 58 bhp of power from a 3-cylinder diesel engine, but give extremely good fuel economy.

The diesel economics is getting more and more attractive for buyers. CarToq believes this is the beginning of big, long-term shift in the market. And most carmakers seem to think so too.