Costlier Fuel Drives Adoption Of CNG Cars

Rising prices of auto fuels in India, one of the world’s most polluted nations, is driving demand for vehicles powered by natural gas, a cleaner and cheaper fossil fuel.Sales of cars and utility vehicles in the world’s fourth largest auto market contracted 16% in April to December as the pandemic disrupted the economy, according to data by the Society of Indian Automobile Manufacturers. But demand for compressed natural gas-powered units jumped. The sales for the CNG portfolio of the nation’s largest carmaker Maruti Suzuki India Ltd. rose 20.5% during the period.“Lower running cost of CNG is the primary driver of faster adaption,” said Shashank Srivastava, executive director, sales and marketing at Maruti Suzuki. The cost of operating a CNG unit is about Rs 1.65 a kilometre, half the money spent on a petrol or a diesel variant, he said.Increasing preference for CNG comes as petrol and diesel prices rose to a record of Rs 86.30 and Rs 76.48 a litre, respectively, in Delhi, on costlier crude. Taxes, however, account for more than half of what consumers pay at the filling station. The Modi administration increased excise duty on fuels twice during the pandemic as crude fell to a two-decade low. And it’s unlikely to cut the levy amid a shortfall in revenue.Rising sales of CNG will also aid the push for alternative fuels to curb pollution and meet climate goals. The nation’s top cities frequently rank among the places with the world’s worst air quality. And natural-gas powered engines are expected to see higher demand even as India builds an electric vehicle infrastructure.Things are finally headed in the right direction for the CNG story in India, said Suraj Ghosh, who leads the South Asia division of powertrain and compliance forecasts at IHS Markit. Not just cab operators, “retail segment buyers have started exploring the option at a much faster pace”, according to him. “When a market leader Maruti Suzuki starts to grow on an average 20%, the market at least grows by 10%.”.A switch to CNG is cheaper for other reasons too. A buyer has to pay Rs 2 lakh more for a BS VI diesel variant and Rs 1.5 lakh more for a petrol model, according to Srivastava. For CNG, the comparative increase is around Rs 60,000.And CNG is expected to remain cheaper than the other two auto fuels. Crisil Research expects Brent to rise about 23% over a year earlier to an average $50-55 a barrel, while domestic gas prices are expected to increase more than 20% to $2.5-3.5 per million British thermal unit in 2021.Maruti Suzuki, the dominant CNG player with more than 90% market share, now offers eight models of gas-powered engines. Of 9.9 lakh cars the company sold in the ongoing fiscal so far, about 11% were CNG. Srivastava said the carmaker expects the sales to jump to 2.30 lakh by the end of the next fiscal, with fleet operators and personal mobility driving “large volumes” in the coming years for the carmaker.Hyundai Motor India, too, saw CNG-powered vehicle sales more than triple in the last one year to 3,000 units a month, according to Tarun Garg, director for sales and marketing.Tata Motors India Ltd. doesn’t offer factory-fitted CNG vehicles but buyers have the option of retrofitting a kit in the aftermarket.A person aware of details, however, said the company is expected to come up with a CNG variant. PB Balaji, chief financial officer at Tata Motor Group, while responding to BloombergQuint's query in the post-earnings conference call, confirmed that the automaker is working on factory-fitted models. He, however, didn't give details..Poised For Growth.CNG has been slow to pick up in India. Introduced in the late 1990s, it accounts for 5% of total vehicles sold. The reason was lack of a refueling network and doubts about the power and safety of natural gas-powered engines.Srivastava said not only the performance parameters of factory-fitted CNG vehicle are the same as a petrol variant now, there is also no safety issue with such kits. Concerns about retrofitted kits no longer exist as that's not allowed under the technical requirements under the BS-VI rollout, he said.Estimates suggest for every one CNG vehicle rolled out of factory, two were retrofitted, according to Srivastava. 'Now, buyers will will opt for company-fitted CNGs, aiding the demand for OEMs.”India is also building on a gas distribution network. Between financial years 2017 and 2020, the number of cities with CNG stations nearly doubled to 236. The government, he said, aims to take it to 375 by 2025. The number of refuelling stations, too, has doubled and is expected to hit 2,300 by March, 4,500 a year later and 10,000 by 2025.The government has already prioritised city-based gas distribution, including the use of CNG for transport. Contracts for 136 ‘geographical areas’ have been awarded in rounds nine and 10 of auctions and that, according to Crisil, is expected to cover about 71% of the cumulative population.According to Ghosh, CNG is also a cheaper way of meeting CO2 goals as only distribution network needs to be strengthened as opposed to electric vehicles that require building a new type of vehicle and infrastructure. And Crisil sees CNG having seven to eight years till electric vehicles become a serious challenge.Ghosh, however, cautioned the government has to let automakers choose their path to cut emissions, whether it’s hybrid, ethanol, CNG or electric technology. “Sudden and abrupt policy changes like setting targets for any specific technology like EV, could derail adaption or create confusion in the industry.”

Costlier Fuel Drives Adoption Of CNG Cars

Rising prices of auto fuels in India is driving demand for vehicles powered by natural gas, a cleaner and cheaper fossil fuel.

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