Toyota to Kia Motors: Companies toe thin line on BSVI diesel pricing

Tata Motors and Mahindra & Mahindra may not sharply jack up prices for their BS-VI line, matching strategy adopted by rivals.

To cushion the impact of a steep price hike, Toyota Kirloskar Motor and Kia Motors India have chosen to keep the price increase in their BSVI diesel models to the minimum, for now. 

This could prompt others Tata Motors and Mahindra & Mahindra (M&M) both with a prominent diesel portfolio, to adopt a competitive strategy when they launch their BS-VI line.

A majority of passenger vehicle makers have yet to complete the rollout of a BSVI range and announce the prices. Effective April 1, India’s automobile market will leap to BSVI emission standards. Depending on engine size, the switch is expected to make diesel offerings more expensive by up to 10-15 per cent as compared to BSIV models. 

Last week, Toyota, market leader in the MPV (multi-purpose vehicle) segment, announced the launch of a BSVI compliant Innova Crysta, taking many by surprise by the pricing. Unlike the expectation of an increase of up to Rs 250,000, the price hike ranges from Rs 39,000 to Rs 112,000.  

“If we had transferred the entire costs incurred in upgrading the Innova Crysta (diesel) from BS-IV to BSVI, it would have become dearer by Rs 200,000 to Rs 250,000 for buyers. Such a steep hike would have deterred them. We, therefore, had to convince our head office to allow us to take a hit on the balance sheet,” said Naveen Soni, senior vice-president for sales and customer service at Toyota Kirloskar.

This was, he clarified, an introductory offer for a limited period. Bookings for the model have commenced and deliveries would start before April, by when BSVI grade fuel is likely to be available.

The company has also re-aligned its grades. It has done away with the ZX AT 2.8 litre model and now has a standard 2.4 litre one. As a result, the top trim became more expensive only by Rs 39,000.  

Kia Motors, local arm of the Korean car maker, entered the Indian market with the Seltos in  August last year, straight with a BSVI compliant engine. It has announced a hike of up to Rs 30,000 (top-end trim) for petrol and up to Rs 35000 (top-end) for diesel models.  

In some ways, being a late entrant has helped Kia. Manohar Bhat, its head of sales and marketing, says their factory, reportedly one of the most contemporary in the world, has helped the cost structure. 

Also, not having a “vested interest” in BSIV has also worked to its advantage. Meanwhile, in a sharp contrast to the broader trend, diesel remains an attractive buy for the Seltos. A little more than half of the over 50,000 units sold since August is accounted for by diesel, says Bhat. 

He attributes it to the relatively stable price gap between petrol and diesel fuel. “The decision regarding diesel and petrol offering is governed by the average running and acquisition costs, and the price gap between the two fuel types,” he explains. The announcement of exiting the small diesel engine segment by many manufacturers, including market leader Maruti, also swung volumes in Seltos’ favour.

Home-grown makers M&M and Tata Motors that have a predominantly diesel portfolio remain tightlipped. Rajan Wadhera, president of the automotive sector at M&M, said the price of its diesel PV line-up was likely to go up by an average of 6-10 per cent. He declined to comment on whether the hikes will be taken in one shot or in phases. “I cannot disclose the strategy,” he said.

Guenter Butshchek, managing director at Tata Motors, says one cannot read much into BSVI price announcements at this point. “We need to see how the reality pans out after  April 1, when most manufacturers will be done with their roll-outs and price hikes These BSVI solutions (Innova and Seltos) have been introduced in the BSIV environment. Some of these prices are very competitive in the context of the current market situation,” he said, alluding to the slowdown in the market. PV sales in India have been on a decline for six straight quarters as economic growth decelerated, deterring buyers from new car purchases.

“Toyota, M&M and Tata Motors have high dependence on diesel and cannot afford to pass on the entire cost to buyers in one shot,” said Puneet Gupta, associate vice-president at IHS Markit. The Innova is a mainstay for Toyota in India. Therefore, a steep hike would have proven detrimental to its sales, he added.