With the onset of the demise of diesel for the small-car segment in the BS-VI era, CNG has emerged as a top choice for customers, albeit with some compromises.
16 Nov 2023 | 4413 Views | By Ketan Thakkar and Mayank Dhingra
The passenger vehicle (PV) segment in India has come of age with the market maturing with more ...
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The passenger vehicle (PV) segment in India has come of age with the market maturing with more upmarket models and consumer preference shifting towards more premium, safer, and feature-loaded cars, particularly in the last three years. However, the cost of running remains a key deciding factor for customers in the mass-market segment, those eyeing a purchase in the Rs 5-15 lakh price bracket.
While diesel used to be a strong contender to gasoline-powered vehicles in offering better fuel efficiency and costing less than petrol to refuel, the market dynamics have completely transformed after April 2020, with the introduction of BS-VI emission standards in India. The stringent emission norms marked the onset of the demise of diesel engines, particularly in the country’s small-car segment, and have given a huge fillip to the sales of cars equipped to run on compressed natural gas or CNG fuel.
According to data sourced from JATO Dynamics, CNG sales in India have registered a tremendous increase in the last three years, with volumes growing from 161,378 units in FY21, to 225,370 units in FY22, and nearly doubling to 421,420 units on a year-on-year basis in FY23. While CNG penetration in India’s PV segment was pegged at 6.59 percent in FY21, it grew to 7.26 percent in FY22, to reach 11.03 percent in FY23.
India’s largest carmaker, Maruti Suzuki India (MSIL), which completely exited the diesel space in April 2020, has been betting big on the emergence of the cleaner, and greener CNG fuel, which it introduced first as a factory-fitted option more than a decade ago in 2010. The growing market as well as the consumer need for pocket-friendly commute has today seen CNG contribute up to 25-26 percent of MSIL’s overall volumes, with the carmaker holding a dominating 74 percent share of the CNG PV market in the country. MSIL foresees CNG contribution to reach almost 33 percent of its total sales by FY31.
“There are multiple factors influencing the CNG volumes, which, today comprise almost 14 percent of the total PV industry. One of the key drivers is the difference in prices of CNG and gasoline, which brings down the running cost of a CNG car to less than half of petrol. The cost-per-kilometre of a CNG averages to around Rs 2.40, whereas for petrol, it stands at almost Rs 5 per kilometre.
“Furthermore, the huge increase in the number of CNG pumps in a city, as well as the number of cities where CNG is now available, is the second major driving factor. Today, CNG infrastructure is present in 333 cities, across 26 States in the country, and the fuel gets dispensed from 5,710 pumps. In comparison, CNG infrastructure was only limited to 145 cities, and 13 States (1,233 pumps) in FY17,” Shashank Srivastava, Senior Executive Officer, Sales and Marketing, MSIL, told Autocar Professional.
“The third factor is the changing consumer perception of CNG, which was earlier believed to be less safe, poor in performance, and one that affected the longevity of the engine. However, all these concerns have been alleviated by the performance of the existing products in the market. Even from a safety perspective, CNG-equipped models are tested on the same parameters as their petrol and diesel counterparts,” he added.
Srivastava said that with these receding fears, CNG is emerging as a strong consumer option for intra-city as well as inter-city runs, and is well complemented by the continuously strengthening CNG infrastructure, which is projected to grow to 8,750 pumps by end-FY25; to 10,200 pumps by end-FY26; 11,800 pumps by end-FY27, and 12,400 pumps by end-FY30 in the country. “So, the number of cities, States, pumps, as well as the number of pumps-per-city are only slated to grow further, therefore, enabling a huge consumer demand for CNG in the future,” he said.
CNG enabling CAFE targets
With CNG inherently being up to one-and-a-half times more fuel efficient than gasoline, the growing volumes of CNG-equipped models are also helping passenger vehicle OEMs in India to achieve their Corporate Average Fuel Economy or CAFE targets, which are part of the existing emission regime. “Therefore, companies are interested in selling more CNG cars, and from a government perspective, CNG is much cheaper to import than crude oil, and helps save the nation foreign exchange. It is a win-win for all,” Srivastava pointed out, while saying that the only major hurdle that remains from a consumer point of view is the limited boot space. Vinay Pant, Head of Marketing, Tata Motors Passenger Vehicles Limited told Autocar Professional that the company addressed this issue by introducing India’s first twin-cylinder CNG technology, which is now available across its entire range, including the Tiago and Altroz hatchbacks, entry-SUV Punch, and Tigor compact sedan. “With a deep understanding of the customer’s needs, Tata Motors has developed an industry-first CNG technology which does not compromise on boot space, and comes with best-in-class comfort and premium features that customers enjoy,” he added. “We are witnessing a paradigm shift in the choice that customers are making today that has led to the growth of CNG in the country. Customers are increasingly choosing alternate fuel options with the intent of an economical as well as eco-friendly drive. CNG as a fuel, with its wide availability and accessibility has gained a lot of acceptance,” Pant added.
Tata Motors, which first forayed into the CNG segment with its Tiago and Tigor in January 2022, currently sees CNG contributing to 15-40 percent of its total sales depending upon model and variant. “While states such as Haryana, Delhi, Gujarat, and Maharashtra have embraced CNG vehicles, leading to a deep market penetration, we have also seen the acceptability of CNG in newly opened up regions growing fast,” he said.
For Hyundai Motor India, the country’s second-largest carmaker, CNG has emerged as a strong alternative in the sub-Rs 10 lakh segment, particularly being suitable for entry-level hatchbacks, sedans, and entry-SUV buyers. "The higher fuel efficiency with an incremental cost of less than Rs 1 lakh offers a strong value proposition for entry vehicle buyers. CNG already accounts for about 13 percent of our total sales and with the distribution of gas becoming better, the share is only going to go up,” Tarun Garg, Chief Operating Officer, Hyundai Motor India, said.
The Korean carmaker says that it has witnessed a 5-6-fold growth in its CNG volumes in the last five years, growing from a monthly average of 1,000 units in FY18 to 6,000-6,500 units in FY23. The company offers its Grand i10 Nios hatchback, Aura compact sedan, and Exter entry-level SUV with CNG option, and sees CNG contributing to up to 22 percent, 18 percent, and 75 percent of the respective sales of these models.
“While CNG is extremely good from an environmental perspective, strategically, it helps automakers meet their CAFE requirements. The expansion of the City Gas Distribution Network across the country will help, but the density of CNG stations will play a critical role in accelerating penetration amongst buyers in the newer markets,” Garg said. According to Ravi G Bhatia, President and Director, JATO Dynamics India, “Environmental benefits, energy security, and infrastructure growth are among the key prospects of CNG as an alternative fuel in India’s transportation sector. While it would lead to a reduction in crude oil imports, the decision to incentivise CNG vehicles to address import bills and pollution challenges is a complex policy matter.”
With cost as well as environmental benefits, the penetration of CNG in India’s PV segment is poised to grow in the future, with the number of CNG models already increasing from 13 in 2020 to 25 in 2023. The government’s consistent push to go green by virtue of a strengthening CNG infrastructure is only going to accelerate the demand for CNG cars, which are witnessing a continued evolution in their design and technology.
This feature was first published in Autocar Professional's November 1, 2023 issue.