Supreme Court Lifts Ban On Big Diesel Vehicles In Delhi - A Big Relief For Car Makers

As the Delhi-NCR market contributes to almost 10% to overall passenger vehicle sales in India and even a bigger proportion to luxury car segment, the Supreme Court's decision to lift the ban on diesel vehicles (with engine size above 2,000 cc) in the Delhi-NCR region has come as a relief for automobile manufacturers and their dealers, who had seen significant loss of business since December 2015.

According to Subrata Ray, Sr. Group VP, Corporate Sector Ratings, “As per ICRA’s estimates, ~30% of Utility Vehicle (UV) segment in India had come under the ban. In addition, almost 50-60% of the Luxury Car market in India (i.e. 35,000 units p.a.) was also adversely impacted because of the ban. In lieu of uplifting the ban, the SC has offered the OEMs to pay 1% cess, which will be passed on to the customers and is unlikely to adversely impact demand in ICRA’s view.”

ICRA expects that industry growth is likely to benefit from this recent development as some OEMs have already launched petrol variants on their existing models, others are in the process of doing so. We believe that the demand for diesel vehicles (below 2,000 cc) is unlikely to improve as the difference in rates between petrol and diesel is lowering day by day.