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Maruti Zen, Esteem exit diesel race

By S Kalyana Ramanathan in New Delhi
April 16, 2005 10:34 IST
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Maruti Udyog Ltd has exited the diesel vehicle market for now by stopping production of the diesel versions of its Zen and Esteem, thus paving the way for competitors, especially Tata Motors.

Several Maruti dealers said they were holding no stock of the diesel version of Zen and Esteem as the company had stopped shipping these cars.

Maruti officials confirmed that production had been discontinued because the upgradation of the engines of these two cars to meet the Bharat stage III norms was turning to be commercially unviable, given their small sales volumes. Maruti was sourcing the diesel engines from Puegeot of France.

The diesel Zen was selling around 500 units per month. Now, the diesel segment in the compact car segment is left open for the Tata Indica.

Almost 80 per cent of Tata Indica's average monthly sales of 11,000 are recorded in the diesel segment. The car has been a hot favourite among fleet operators. The diesel Zen was more a family car than a cab operator's choice.

The diesel Esteem was selling around 100 cars per month. The numbers are now expected to be grabbed by Tata Indigo and Hyundai Accent, among others.

Though Maruti has discontinued the production of its diesel cars, the company plans to aggressively re-enter the diesel segment with its own engines in 2007.

The Maruti board had recently cleared a Rs 1,747 crore (Rs 17.47 billion) investment in a new diesel engine and transmission manufacturing facility at Manesar in Haryana.

The facility will have a capacity to produce 100,000 diesel engines per annum. The project is being implemented under a new company called Suzuki Powertrain India in which Suzuki Motor Corporation of Japan will hold a 51 per cent stake, while Maruti will hold the remaining 49 per cent.

The company had also indicated the capacity for diesel engines will be scaled up to 300,000 units per annum in phases.

Industry analysts point out that the current dormant diesel car market is likely to see some action in the coming years.

From a low penetration of 20-22 per cent in the passenger vehicle market, the diesel segment has been projected to have a potential to hold 45-50 per cent market share by 2013.
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S Kalyana Ramanathan in New Delhi
Source: source

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