DIESEL CARS REGAIN GROUND AS BUYERS WEIGH FUEL COSTS, E20 CONCERNS

After years of steadily losing ground to petrol, CNG and electric vehicles, diesel-powered passenger vehicles are making a comeback in India. The fuel's share in the passenger vehicle market has risen to 19.39 percent, so far, in FY27 from 18.08 percent in FY26, according to vehicle registration data sourced from Vahan and the Federation of Automobile Dealers Associations (FADA).

Monthly average registrations have also climbed nearly 15 percent to around 82,000 units from about 71,400 units last fiscal.

The revival comes at a time when India has successfully implemented 20 percent ethanol blending (E20) in petrol, while diesel remains untouched by blending mandates. Industry executives say the shift is being driven by a combination of factors, including strong demand for larger SUVs, rising petrol prices and lower running costs of diesel vehicles.

Driving on diesel

Dealers also point to a section of buyers who remain apprehensive about the long-term impact of E20 petrol on older or non-E20-compatible vehicles, prompting them to consider diesel models instead.

"Definitely diesel demand, at least in our portfolio, has been increasing and there is no doubt about that," Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility managing director Shailesh Chandra told Moneycontrol. "Whenever SUVs grow, especially around the Rs 15 lakh price point, diesel demand will grow. There is a natural inclination of people to go for diesel."

Chandra, however, stopped short of attributing the trend solely to ethanol blending. "I would not say that ethanol is the reason behind diesel demand growing till I have completely convinced myself. But naturally, because of new launches, consumer price points, diesel is a very active powertrain consideration in that segment," he said.

Tata Motors has seen growth in diesel demand over the past three years whereas petrol has declined. According to Chandra, nearly 95 percent of the company's incremental volumes during the period have come from CNG and electric vehicles, while diesel has grown marginally and petrol volumes have declined.

Luxury carmaker Mercedes-Benz is witnessing a similar trend. Diesel accounts for around 40 percent of its overall sales mix in India.

"More than this blending topic, the biggest reason for purchase when customers look at the powertrain is the total cost of ownership," Mercedes-Benz India managing director and CEO Santosh Iyer said. "Last quarter, we also saw a significant increase in petrol prices, which led consumers shifting to diesel or EVs across the portfolio."

A lot to choose from

The market has also witnessed a steady stream of diesel-powered launches over the past two years. Since mid-2023, non-luxury brands have introduced at least a dozen new or updated diesel models, almost entirely concentrated in the fast-growing SUV segment.

These include the Mahindra XUV 3XO and Thar Roxx, Tata Curvv, Safari and Harrier facelifts, Hyundai Creta and Alcazar facelifts, Kia Syros, Seltos facelift and Carnival, Jeep Meridian facelift and JSW MG Majestor.

The fresh product pipeline has ensured that diesel remains a relevant choice for buyers seeking higher torque and lower running costs.

The renewed interest in diesel comes even as the government prepares to extend its biofuel programme beyond petrol.

Road transport and highways minister Nitin Gadkari recently said India is preparing to introduce blending of up to 15 percent isobutanol in diesel as part of the next phase of its energy transition.

Since ethanol cannot be blended directly with diesel, the government is exploring isobutanol — an advanced biofuel produced from ethanol—as an alternative that can reduce dependence on fossil fuel imports without requiring significant engine modifications.

2026-07-20T09:17:37Z