The Indian operations of Japanese car giant Toyota is understood to have asked its parent to consider setting up of a diesel engine plant here, buoyed by the rapidly increasing demand for diesel vehicles.
According to sources, Toyota Kirloskar Motor (TKM), the Indian joint venture with the Kirloskar Group has put forward its proposal to set up a diesel engine plant in the country after the Budget for 2012-13, which spared diesel vehicles from additional taxes.
"With the demand for diesel cars in India rising very strongly, a request has been made to Toyota's Tokyo headquarter for a diesel engine plant in India. It is very important to have more localisation to meet the increased demand," a source said.
The company has seen demand for its diesel cars rising significantly, especially on its latest two models sedan Etios and compact car Liva. In 2011, TKM sold 63,575 units of Etios and Liva, out of which 70% came from diesel variants.
"So far we have not heard anything as the company is still studying the proposal. However, we are hopeful of a positive decision. We cannot say anything further at this moment," the source said.
A TKM spokesperson said: "We are going to assemble only gasoline engines, as of now there is no plan to manufacture or assemble diesel engines in India."
TKM is currently investing Rs 500 crore to set up a petrol engine plant and expanding its transmissions capacity in Bangalore.
During Delhi Auto Expo in January this year, TKM had said it will consider setting up a diesel engine plant in the country after observing the government's policy decision on subsidy to diesel during the Budget in March.
"We will wait till the Budget. After that, we will look at the feasibility of setting up a diesel engine plant in India," TKM Deputy Managing Director (Commercial) Shekar Viswanathan had said.
He had said the company will wait till there is a clarity on policies for continuation of subsidies on diesel pricing.
However, with the government not bringing in any new tax proposals for diesel-driven vehicles, manufacturers have decided to go ahead with their investment plans.
Last month, the country's largest car maker Maruti Suzuki India had announced investments of Rs 1,700 crore to set up a diesel engine plant, with a total annual production capacity of three lakh units, at its Gurgaon facility by 2014.
Rival Hyundai Motor India, which had put on hold its Rs 400 crore diesel engine plant last year, said it is evaluating the situation after the Budget.
Society of Indian Automobile Manufacturers had earlier said that auto maker had hold back investments of over Rs 3,000 crore due to fear of diesel tax and lack of a clear roadmap on pricing of the fuel.
