Fuelling The Future
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About 6 per cent of all cars sold in 2010-11 were CNG powered, against 1-2 per cent in 2008. Last fiscal, 4 lakh CNG kits were sold in India. According to a study by market research and information analysis firm, RNCOS, the CNG kit market stood at Rs 1,600 crore last year, and is expected to grow at an annual rate of around 22 per cent to Rs 3,000 crore by 2014.
A large number of buyers, who, hitherto, shelled out Rs 65.64 for a litre of petrol are now opting for CNG. A survey conducted by Indraprastha Gas last year pointed out that around 5,000 vehicle owners switch over to CNG every month in the NCR alone. "About 25 per cent of the 100-110 cars sold per month are CNG-fitted," says a Delhi-based Maruti dealer.
The company saw sales of 5,000 CNG-fitted cars a month in 2011, up from 1,000 per month in 2010. "You will be surprised to know that in New Delhi, forty per cent of the WagonR sold have CNG kits," says Mayank Pareek, managing executive officer (marketing and sales) at Maruti Suzuki. It has pushed demand for CNG in the region to 12 to 15 per cent a year. "You will find a similar ratio in Gujarat (like NCR). In Mumbai, it is less because the availability (of CNG) was an issue, but it is going up now," adds Pareek. It sold an average of 76,100 CNG-fitted cars per month during April-December of 2011. Maruti realised the potential of CNG in August 2010; now it offers factory-fitted CNG kits in five of its models: Alto, Estilo, Eeco, WagonR and SX4. "We are marketing it more and communicating it to customers aggressively," says Pareek.
|MAYANK PAREEK, Managing Executive Officer, Maruti Suzuki |
Our five models have factory-fitted CNG kits : Alto, Estilo, Eeco, WagonR and SX4 (BW Pic By Sanjay Sakaria)
CNG Catches A Spark
Other car makers such as Hyundai, General Motors (GM), Toyota and Tata Motors are following suit. "We have seen a steady growth in the sales of our CNG cars," says Arvind Saxena, director, sales and marketing of Hyundai Motor India. The number two auto player started offering CNG options in 2007 and now offers it for Santro, i10, and Accent models for an additional Rs 60,000. A round-up of Hyundai dealers shows that over 20 per cent of Santros and i10s sold in New Delhi are CNG-fitted. "We sell close to 200 units of i10 and 100 units of Santro each month; almost 60 run on CNG," says a south Delhi-based dealer. GM offers CNG kits across its range, barring only two cars — Cruze, a diesel sedan; and Captiva, an SUV. "Out of total monthly sales of 250 cars, 30-40 are CNG variants," says a GM dealer. Apart from hybrid technologies, CNG is also the cleanest fuel available in the market as CO2 emissions are 20 per cent lower than emitted by a conventional petrol vehicle. The environment-friendly fuel lightens the buyer's pocket by Rs 45,000 to Rs 60,000 at a car dealership, however this cost goes down by half at a non-dealer vendor.
But Is Still Not On Fire
Car-makers battled a host of issues pertaining to CNG vehicles including poor pick-up and loss of power which were taken care of by improvement in technology but poor infrastructure still restrains its mass usage. Vishnu Mathur, director general of auto industry body — Siam — believes that the future availability of CNG is a major issue.
"Consumers are attracted to CNG due to its lower price. If the gas is available at domestic rates, it is good. But if it is imported, the price is likely to rise, thus reducing the appeal of the fuel," he says. He adds that the auto industry needs clarity on fuel policy and its pricing from the government to be able to tap consumer sentiment. Mathur's words explain the vulnerability of the auto industry to the fluctuating demand for different fuel types, while also exposing the industry's fear of the government changing its stance on CNG just like diesel.
Environment-friendly initiatives of the Delhi government for public transport led to the development of CNG infrastructure. Similar endeavours in Gujarat and Maharashtra went a long way in the ready availability of the fuel. As CNG requires laying of gas pipelines, the development of infrastructure requires huge investment without which, all initiatives promoting CNG could render futile. "That would mean fewer filling pumps and long queues," says Ramesh RK, general manager (marketing) at Toyota Kirloskar (India) which offers CNG fitment on demand for its MPV Innova and sedan, Corolla Altis.
Competing With LPG
As the majority of CNG variants are available only in Delhi-NCR, Mumbai and Gujarat (where filling stations are available), they are facing competition from factory-fitted LPG variants which are not only cheaper but are also available in more than 17 states with a network of close to 1,100 stations across the country, as compared to only 670 CNG stations in 5-6 states. One of the popular LPG cars is Hyundai Santro which was launched in September 2008 before the company rolled out LPG-propelled i10 Blue Drive, followed by an LPG version of its latest small car, Eon. Chevrolet has Beat and Spark in LPG variants, Tata Motors has Indica Xeta, while Maruti Suzuki offers WagonR Duo, Omni Cargo, and the 800 cc. Hyundai's Saxena says the wide availability of LPG made the company launch LPG variants. The Korean car maker, however, was not the first one to bite into the alternative fuel market. Maruti Suzuki – in July 2006, first introduced an LPG version of WagonR, after successfully introducing its Omni Cargo in 2004. "What customers do and which we do not want to encourage is that they buy an LPG-fitted car and get it fuelled at some illegitimate station, which is not safe," explains Pareek. Auto LPG prices mirror that of domestic LPG, a heavily subsidised fuel, and is getting closer to that of diesel. However, its installation on a petrol car costs one-third the premium one pays for a diesel variant. So, it remains popular.
|LOWELL PADDOCK, President, General Motors (GM) India|
We started rolling out CNG fitments after realising its potential (BW Pic By Tribhuwan Sharma)
A lot needs to be done to increase awareness about CNG as a fuel. "OEMs need to work on the customer psyche, dispelling doubts about these fuel options," says Abdul Majeed, auto partner at consulting firm, PwC. Improvements in technology has reduced the power loss associated with CNG, while the pickup and drive is similar to that of a petrol car. If you get a CNG kit installed, it does not reduce the size of your petrol tank though it does reduce the foot space significantly; you can also get it fitted through your dealer under OEM's supervision, and maintain the warranty on your car.
On the savings side, the one-time cost incurred in CNG kit installation can be recovered in the shortest span of time as the running cost per kilometer for CNG is Rs 1.88. Diesel is the second most economical fuel after CNG as its running cost per kilometer is about Rs 1.97, LPG comes third at Rs 2.6, while petrol costs about Rs 4.4 a kilometer. Developing the sentiment, however, will take some time. For instance, there are only a few takers of CNG variants in the used-car market. Anil Mahajan, a used-car dealer says that the only people who lay their hands on the CNG cars are commercial users. Mahajan sells 10-12 cars a month including 1-2 CNG variants. "People generally do not prefer a CNG car. Even if they want to use it, they would get it fitted in a used car," says another used-car dealer in Delhi.
GM India's president Lowell Paddock says CNG has still not become a popular alternate fuel across India, but until that happens, it will offer all options to the customers. It started offering LPG variants of the Beat and Spark to reach out to a wider customer base in late 2009, and soon rolled out CNG fitments after realising its growing demand. "From a multi-fuel standpoint, we would look at offering alternative fuel like CNG in the near-term, while focusing on hybrids in the longer-term," says Ramesh of Toyota. Maruti's Pareek believes that CNG is the future product. "Once the Kakinada-Jamnagar pipeline is laid, then it (refilling CNG at a station) will not remain a time-consuming affair any more," he says.
After de-regulating petrol, demand for diesel cars has risen thus increasing its consumption. The government is looking at levying extra taxes (excise duty) on diesel passenger vehicles in order to discourage consumption of diesel by the passenger cars. In such a scenario, CNG with its lowest running cost, will be a clear winner not only over petrol, but also over diesel. Though many OEMs have made huge investments in the diesel technology and production capacity but the smarter ones are hedging their risks by playing the alternative fuel card.
Maruti Suzuki and General Motors - having announced substantial investments in diesel play - are also offering CNG and LPG variants, apart from working on the hybrid technologies and electric vehicles. "If anything is more economical than CNG, it is walking," smiles Pareek.
(This story was published in Businessworld Issue Dated 20-02-2012)