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Carmakers eye petrol engine exports as capacities lie unused

The rapid rise in diesel car demand over the last two years has created a unique problem for the industry.

Large petrol engine manufacturing capacities lie unused today, while dealers and plants are up to the neck with stocks of petrol cars having a hard time finding a happy home to park themselves in.

Worried about the dipping returns from its large investments in petrol technology, carmakers are now considering the overseas markets for engine exports. If the diesel car demand rises further, some may consider shutting down part of the petrol engine assembly as well, industry insiders said.

Maruti Suzuki, for which about 40 per cent of its 13.5 lakh annual petrol engine capacity is “under-utilised”, says that pure engine exports to parent Suzuki’s other global markets is a viable option for the interim. The market leader’s total engine capacity is 17.89 lakh a year.

“Its still early, we want to first see how the demand goes as any fresh investment or change in production will require a lot of work. We are talking about various steps we could take at the Management Committee level,” a senior company official said.

Meanwhile, Maruti is also trying its best to increase the petrol car demand. Especially for cars such as the Alto and WagonR, which only have a petrol variant, it is pushing these cars on those who drive less.

According to the company, 26 per cent of car buyers drive below 5,000 km a year. With the break-even for a pricier diesel car coming at a yearly run of only above 12,000 km, Maruti says that such customers would actually manage saving money on a petrol car.

Hyundai, which has a 5.5-lakh petrol engine capacity at its plant near Chennai, will also look to increase exports to offset the dip in domestic demand. “We will also have to work out other strategies to get around the shift in demand. We’re working on that,” said Mr Arvind Saxena, Director for Marketing and Sales, Hyundai Motor India.

Meanwhile, Toyota Kirloskar feels that it has been caught off guard by the sudden rise in the popularity of diesel cars. This shift in demand has come just as its new 9,000 units a month petrol engine plant at Bangalore readies for commercial production by September.

“This is just a petrol engine line and we will continue to import all our diesel engines. With the demand getting skewed, it is definitely a concern for us. We will have to explore different options,” said Deputy Managing Director, Mr Shekar Viswanathan.

Viable option

Another industry official added that setting up a flexible engine plant may be the most viable option today. Such a plant, like General Motors new engine assembly line at Talegaon, can make both petrol and diesel engines. This enables an easy shift as per market demand.

The auto industry has again re-affirmed its demand for a clear and stable fuel policy from the Government. This would help companies forecast market demand more accurately, hence, guiding its investment strategy in the country.

Source : http://www.thehindubusinessline.com/industry-and-economy/economy/article3456469.ece

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