Rising CNG prices shine the clean vehicle market

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Industry executives say rising compressed natural gas (CNG) prices could affect sales of factory-fitted CNG passenger and utility vehicle models.

Fuel prices, positioned as a cleaner alternative to diesel and petrol vehicles, have jumped nearly 70% in the past 12 months. CNG is a popular choice, especially for passenger vehicles that cost less than 10 lakh, and in small utility vehicles.

The preference for CNG vehicles as an alternative fuel option is primarily driven by their lower running costs. However, while CNG prices rose sharply, those of gasoline and diesel either remained largely flat or fell slightly over the same period, following an excise duty reduction in May. This has narrowed the gap between the running costs of CNG and gasoline or diesel vehicles, thereby reducing the cost-benefit ratio of purchasing CNG vehicles.

This leads potential buyers to weigh the trade-off between paying a higher upfront cost for a CNG utility vehicle and compromised trunk space in the case of passenger vehicles, versus the potential savings of less fuel. dear.

According to Maruti Suzuki (India) Ltd, which offers the largest portfolio of CNG models in the country, the traction of CNG models may currently be reduced. “From an operating cost of 1.2/km until today 2.6/km, there has been a significant cost increase, but petrol models still cost 5.1/km to run on average. So there is still a huge gap in cost and relative benefit to customers,” said Shashank Srivastava, Executive Director of Maruti Suzuki. “But if prices rise further, customers will start to consider the trade-off in terms of boot space and price more seriously. .”

Srivastava said Maruti Suzuki continues to record higher monthly sales of CNG models, mainly due to a sharp increase in production after a long period of CNG kit shortages that resulted in long waiting periods, and also due to an expanded range of models. Maruti Suzuki sells seven models of CNG cars. However, the upward trajectory of gasoline prices led the company to slow the pace of launching new CNG models, as it took a phased approach for four new models it planned to launch in the coming months. .

Hyundai Motor India, which sells two CNG models, the Grand i10 NIOS and Aura, said it has introduced discounts, in addition to marketing and advertising initiatives, to ensure continued sales growth.

“We almost doubled our sales of CNG models compared to last year. However, the difference between CNG and gasoline, which reached up to 30- 40, is now reduced to 10-15. This made CNG a less attractive bet, but since it offers 30% more mileage, it’s still attractive. On the other hand, the number of fuel pumps is increasing and compared to four months ago when there was a waiting period on the CNG models, the models are now commercially available,” said said Tarun Garg, Director, Sales and Marketing, Hyundai Motor India.

Reduced traction is also evident in utility vehicles.

“In the medium and light commercial vehicles (I&LCV) category, CNG penetration had increased to almost 40% of the total portfolio while CNG had a price advantage of almost 50% over diesel. However, over the past three months the price advantage has narrowed and the arbitrage is now around 20%. Despite the drop, we still have nearly 30% CNG penetration. So the penetration that had gone above 40% has come down to just under 30%,” said Girish Wagh, chief executive of Tata Motors.

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