Diesel engines remain popular for Indian SUVs, offering torque and efficiency for long drives. However, upcoming BS7 emission standards will significantly increase costs.Hatchback and sedan buyers in India may have distanced themselves from diesel, but it remains the fuel of choice for torque-savvy sports utility vehicle (SUV) enthusiasts, off-roaders and long-distance cruisers.
Thanks to this loyal following, the market share of diesel passenger vehicles (PVs) has stayed broadly stable around 18 per cent for the last three years, though it has fallen from a peak of 47 per cent in 2012-13 as tighter emission standards and the industry’s pivot toward petrol, CNG and electrification steadily pushed diesel out of urban commuter cars.
However, with BS7 emission standards now set to sharply raise costs, the next regulatory cycle could determine whether diesel’s SUV stronghold survives or that finally breaks, according to industry experts. Diesel is no longer competing for the entry-level urban buyer. Instead, it is becoming concentrated in larger vehicles where customers still prioritise pulling power, highway efficiency and driving range over fuel type transitions.
As investing in small diesel vehicles no longer makes economic sense for a majority of automakers, the market has become increasingly dominated by manufacturers who have stayed invested in the fuel. Mahindra & Mahindra is a beneficiary of this, with its diesel-powered SUVs such as the Scorpio, Thar and Bolero witnessing strong demand.
M&M Diversifying its Portfolio
But the company too is now positioning itself across technologies rather than betting on a single fuel amid increasing concentration and regulatory risks. “Our SUV portfolio is built around a diverse range of powertrain options, reflecting the wide variation in customer needs based on usage patterns, terrain and realworld applications,” said Nalinikanth Gollagunta, chief executive of Mahindra’s Automotive Division.
“While we remain committed to accelerating our EV journey, ICE vehicles (driven by fossil fuels) continue to be relevant for many customers, and we will continue to innovate across all powertrains,” he added. In the luxury vehicle market, where buyers focus on performance and cost of ownership, demand stays strong for diesel-powered models, say manufacturers, even as they are also diversifying into electric powertrains.
“Last quarter, we saw a significant shift towards diesel, with over 50 per cent of our sales coming from diesel models, largely driven by total cost of ownership,” said Santosh Iyer, MD and CEO Mercedes-Benz India. “Customers will decide based on ownership cost, purchase price, running cost and residual value,” Iyer said, while adding that the company also sees “equal opportunity for plug-in hybrids, hybrids and EVs”. That trend underlines how diesel’s relevance in India has shifted from affordability to performance.
This is not the budget buyer choosing diesel to save money on fuel, said Ravi Bhatia, president of Jato Dynamics. “This is the buyer of a `1 crore luxury SUV still preferring diesel for its torque-heavy driving character, effortless cruising ability and long-distance practicality,” he said. REGULATORY RISK BS7 emission regulations are expected to significantly raise compliance costs for diesel vehicles, potentially reshaping the economics of the segment.
“Higher compliance costs could sharply raise diesel vehicle prices, forcing both automakers and consumers to decide whether diesel’s remaining strongholds are durable enough to survive the next regulatory wave,” said Bhatia.
Industry estimates suggest BS7-related price increases could range from 30,000 to more than 1 lakh per vehicle. For buyers in the 10-20 lakh SUV category, diesel’s traditional mass-market stronghold, that could become a key inflection point.
“The question is whether the pricesensitive diesel loyalist will follow across that price threshold, or defect to CNG, hybrid or a base-spec EV,” Bhatia said.
