CNG car sales drop as fuel becomes costlier

NEW DELHI: Once known for their affordable running costs, cars powered by compressed natural gas (CNG) are losing that advantage with higher fuel prices forcing customers to go back to petrol and diesel vehicles in a depressed market.

CNG prices rose to an all-time high in Delhi and the National Capital Region last month, while a rate increase is also expected in Mumbai, the largest market for CNG cars across India. CNG is also available in Pune.

"The demand in these big markets has virtually dried up," said a senior executive at Maruti Suzuki, India's biggest car maker.

This decline comes as the auto industry has been hit by an economic slump, rising fuel prices and high inflation that makes loans costlier. Car sales dropped 10% in 2013, the steepest yearly decline since 2002.

Once regarded as the long-term answer to fast-depleting fossil fuels such as petrol and diesel, CNG was also adopted on a wide scale by public transport in Delhi for its clean-burning, ecological credentials. Most taxis, autorickshaws and public transport buses in the capital run on the fuel, although the woefully inadequate number of outlets means long queues at filling stations.

After three increases in 2013, CNG is at a record of Rs 50.10 per kg in Delhi and Rs 56.70 per kg in Noida, Greater Noida and Ghaziabad. Prices are likely to rise further.

Prices have not been raised in Mumbai because of a stay order. Prices have declined by a few rupees to Rs 59 per kg from Rs 65 in Gujarat as the Supreme Court upheld a Gujarat High Court order that CNG prices should be uniform across the country.

The confusion over the latest round of price increases has discouraged customers and manufacturers are therefore sexpecting a further slump in sales in the coming months.

"There is no incentive to go for a CNG car. Customers are increasingly preferring diesel and petrol cars as (the differential with) CNG prices has narrowed considerably in the past few months," said a senior Hyundai executive who didn't want to be named.

The CNG price in Delhi has remained unchanged despite chief minister Arvind Kejriwal promising a rollback and criticising the central government for raising the rate.

Automobile companies say at least a 20% price differential is necessary to incentivise customers to opt for the greener CNG over diesel or even petrol.

"CNG delivers a similar mileage to diesel, but customers tend to lose on boot space due to the fuel storage cylinder and have to brace long queues for refilling," said an auto analyst. "Also, they face range anxiety due to limited storage capacity of few kilogrammes that runs only few hundred kilometres, which is more than double that in diesel."

CNG car sales have declined from 6,000-7,500 monthly in the domestic market to less than half of that in recent months, with the numbers set to drop even further.

India's biggest carmaker Maruti Suzuki is No. 1 in CNG cars, with Alto, WagonR, Eeco, Ertiga and Sx4 versions that run on CNG. Others with CNG versions are Hyundai's Santro and i10, besides GM's Spark, Enjoy and Tavera.