Fuel Technologies Indian Car Industry

Fuel technologies

In this chapter, we have discussed the usage of various fuel types and their mix in the Indian passenger car industry. We have classified the fuels into two types - conventional fuels and alternative fuels. Conventional fuels include fossils fuels (eg. petrol and diesel) and are used in most of the vehicles whereas alternative fuels are non-conventional fuels like CNG, LPG, bio-diesel, fuel cells etc.

Conventional fuels

Petrol and diesel account for the majority of car fuel usage. The main difference between petrol and diesel engines is that the latter uses compressed air to ignite the fuel injected in the cylinder. As the fuel is mixed with considerably more air than in comparable petrol engines, the diesel engine is the most fuel-efficient of all combustion engines available as on average, they consume 30 per cent less fuel than petrol engines. The benefits arising from this combined with the cleaner combustion properties of diesel fuel also result in significantly lower carbon dioxide emissions.

Petrol is the main fuel used in the United States and Japan and these markets have very low level of dieselisation. However, the relative use is more balanced in European countries like Germany, UK etc, where diesel-based car sales accounted for over 50 per cent of total sales in 2008. In India, 24 - 25 per cent of the total cars sold have diesel engines.

Table 1: World-wide diselisation

Countries	2006	2007	2008
US	0.82	NA	NA
Japan	3.3	2.7	NA
Germany	44.2	47.8	44.1
Italy	58.2	55.8	50.7
UK	38.3	40.1	43.6
India	20.3	23.8	25.4
Note: For India, the numbers are for financial years 2006-07, 2007-08 and 2008-09.
Source: CRISIL Research

The share of diesel in various countries has grown between 1993 and 2008. However, in case of Japan it has declined significantly from 10.4 per cent to 2.7 per cent between the same periods. Dieselisation in Western Europe has rapidly increased from 19.8 per cent in 1993 to about 52.7 per cent in 2008. This is due to the introduction of sophisticated control mechanism enabling lower vibration, better diesel injection systems and exhaust systems.

Dieselisation in India

In India, dieselisation levels have changed significantly. The penetration has increased to 25 per cent for 2008-09.

Petrol is the main fuel for cars in India, with a share of 72 per cent of the total new sales, followed by diesel with a share of 25 per cent whereas alternative fuels such as CNG and LPG account for around 2.5 per cent share. Petrol's share has historically been higher, primarily due to Maruti Suzuki India Ltd's dominance, a predominantly gasoline technology-based player and low refinement of conventional diesel car engines, which led to high noise and vibrations. The launch of Tata Indica and Tata Indigo enabled an increase in sale of diesel vehicles. In addition, the launch of Swift diesel followed by Dzire with a superior DDiS multi-injection technology engine and Mahindra Renault's Logan with dCi common rail diesel engine has boosted the number of retail buyers in the diesel segment. The share of diesel cars in total sales has reached around 25 per cent in 2008-09. We expect the share of diesel cars to increase significantly in the next 2-3 years as other players also expected to launch diesel variants and models at frequent intervals.

Previously, car manufacturers considered diesel models to be targeted at the tourist segment, but with the fuel economics becoming more important to customers, manufacturers have started launching existing models with the diesel option, in order to gain market share.

Alternative fuel options

Compressed Natural Gas (CNG) and Liquified Petroleum Gas (LPG)

CNG is considered to be the most environment-friendly fuel amongst all hydrocarbons as it emits the lowest amount of toxic gases and costs around one-third of petrol's price. When a vehicle is fitted with a CNG kit, the basic engine characteristics of vehicle are retained while converting it to run on CNG. Therefore, the vehicle is capable of running either on petrol or CNG at a flick of a switch on its dashboard. Moreover, corporate organisations and firms can claim 100 per cent depreciation for CNG kits as pollution control equipment. The prime disadvantage of a CNG vehicle is the loss of luggage space. CNG cylinders take up a lot of storage space and generally have to be placed in the boot of the car. The body of the cylinders too has to be made of good grade steel capable of enabling better life with higher wear and tear on account of continues usage. The cost of conversion too is another major determining factor. The conversion kit can cost from Rs 25,000 to Rs 35,000 but the cost can be recovered from fuel savings over a period of time.

LPG (Liquefied petroleum gas) is a natural hydrocarbon fuel made up of propane and butane, and is a byproduct of oil and gas industries. Burning LPG produces lesser carbon dioxide than other fuels and therefore causes lesser pollution.

The surge in crude prices is encouraging OEMs to introduce CNG/LPG cars to reduce the overall running cost. For instance, Maruti is offering an LPG variant on Omni and Wagon-R whereas Hyundai has launched the CNG variant of Santro. Hyundai also plans to launch the LPG variant of Santro, Getz and Accent.