Why Switching From Diesel is an Expensive Deal for India?

 

Just a few days back, at the annual conference of the Society of Indian Automobile Manufacturers (SIAM), Union Minister for Road Transport and Highways Nitin Gadkari made a comment urging the finance minister to impose a pollution tax on every engine that runs on diesel. 

But things took a wild twist! What began as a well-intentioned proposal got twisted into a rumour that the government is going to impose a 10% GST on diesel-powered vehicles.

Rumours were so strong that soon after, stock prices of India’s largest commercial vehicle maker – Tata Motors, second-largest – Ashok Leyland, and Mahindra & Mahindra, which contributes to almost half of all diesel passenger vehicles sold in India, went down.

 

 

But that wasn’t the end; something else also happened last week! Mumbaikars gathered together to say goodbye to the iconic Red Double-Decker bus in Andheri. And with this, we witnessed the end of an era of red diesel-run double-deckers, introduced on the city streets 86 years ago.

Are there any other alternatives besides diesel? 

Yes, there are several alternative fuels and propulsion technologies that are being explored and used as alternatives to diesel in various applications, including commercial vehicles. These alternatives aim to reduce emissions, improve fuel efficiency, and address environmental concerns. Here are some of the primary alternatives to diesel:

  1. Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG):
    • CNG and LNG are cleaner-burning alternatives to diesel. They produce lower levels of greenhouse gases and air pollutants.
    • CNG is typically used in light-duty and some medium-duty vehicles, while LNG is more commonly used in heavy-duty trucks and buses.
    • Infrastructure for natural gas refueling is expanding in some regions.
  2. Electric Vehicles (EVs):
    • Electric commercial vehicles, including trucks and buses, are becoming more common as battery technology advances.
    • EVs produce zero tailpipe emissions, making them environmentally friendly.
    • Challenges include limited range for heavy-duty applications and the need for charging infrastructure.
  3. Hydrogen Fuel Cell Vehicles (FCVs):
    • FCVs use hydrogen to generate electricity to power electric motors. They produce zero emissions at the tailpipe.
    • Hydrogen can be produced from a variety of sources, including renewable energy, making FCVs a potentially sustainable option.
    • Challenges include the need for hydrogen infrastructure and cost considerations.
  4. Biodiesel:
    • Biodiesel is a renewable fuel made from vegetable oils, animal fats, or recycled cooking oil.
    • It can be blended with traditional diesel fuel, reducing greenhouse gas emissions and air pollutants.
    • Biodiesel is compatible with existing diesel engines and infrastructure.
  5. Propane (Autogas):
    • Propane is a clean-burning alternative fuel used in a variety of vehicles, including commercial trucks and buses.
    • It offers similar fuel efficiency to diesel and produces fewer emissions.
  6. Hybrid Vehicles:
    • Hybrid commercial vehicles combine traditional internal combustion engines with electric propulsion systems to improve fuel efficiency.
    • They can be designed for various applications, including delivery trucks and buses.
  7. Renewable Diesel:
    • Renewable diesel is a drop-in replacement for conventional diesel fuel made from renewable feedstocks like vegetable oils and animal fats.
    • It has similar properties to petroleum diesel but with lower greenhouse gas emissions.
  8. Synthetic Fuels:
    • Synthetic fuels, such as synthetic diesel or synthetic natural gas, can be produced using renewable energy sources like hydrogen and carbon dioxide captured from the air.
    • These fuels have the potential to be carbon-neutral and can be used in existing diesel engines.

The choice of alternative fuel or technology depends on factors like vehicle type, application, infrastructure availability, and regulatory incentives. Many countries and regions are implementing policies and incentives to encourage the adoption of cleaner transportation options, which may accelerate the shift away from diesel in t

OPTION 1 – Hydrogen fuel cells and hydrogen-powered engines sound promising, but the cost of hydrogen needs to be reduced at least by two-thirds for it to make sense for commercial use.

OPTION 2 – Electric buses are becoming more common, especially with state governments adopting them under a gross cost contracting (GCC) model. However, this poses a significant financial risk for manufacturers, as they have to account for these vehicles on their own balance sheets.

OPTION 3 – Ethanol comes with a hefty price tag, currently sitting at around Rs. 68 per litre. It’s an expensive choice and is also not as efficient as traditional petrol or diesel.

OPTION 4 – Green hydrogen production and distribution for transport is just starting to take shape.

Given these challenges, diesel engines are likely to maintain their dominance in long-distance transport, and changes in total cost of ownership (TCO) trends and government orders are pushing for the adoption of alternative fuels like CNG and electricity for smaller commercial vehicles. The road ahead promises innovation, but diesel isn’t ready to retire just yet.

 

 

Why does diesel rule the road for commercial vehicles?

Diesel has been the preferred fuel for commercial vehicles for several reasons, and its dominance on the road for this sector can be attributed to a combination of economic, technical, and historical factors:

  1. Energy Density: Diesel fuel has a high energy density, which means it contains a significant amount of energy per unit volume or weight. This high energy density allows diesel engines to generate more power and torque compared to alternative fuels like gasoline, making them well-suited for heavy-duty commercial vehicles.
  2. Fuel Efficiency: Diesel engines are known for their superior fuel efficiency, especially at constant speeds and heavy loads. Commercial vehicles, such as trucks and buses, benefit from this efficiency as it reduces fuel consumption and operating costs over long distances.
  3. Longevity and Durability: Diesel engines are robust and built to withstand heavy use and high mileage. They tend to have longer lifespans and require less frequent maintenance compared to some other types of engines, making them ideal for commercial applications where uptime is critical.
  4. Torque: Diesel engines produce high levels of torque at low RPMs (revolutions per minute). This torque is essential for commercial vehicles that need to carry heavy loads and maintain consistent speed on highways and steep gradients.
  5. Towing Capacity: Due to their torque characteristics, diesel engines are often chosen for towing and hauling purposes. This makes them popular for commercial vehicles like freight trucks and construction equipment.
  6. Fuel Availability: Diesel fuel is widely available in many parts of the world, making it convenient for commercial vehicle operators who need to refuel frequently during long-haul trips.
  7. Economic Considerations: Historically, diesel fuel has often been cheaper than gasoline, and this cost advantage has made it more attractive for commercial operators looking to minimize operating expenses.
  8. Global Use: Diesel engines and infrastructure for diesel fuel are widely used and established in the global commercial vehicle industry. This ubiquity makes it easier for manufacturers and operators to stick with diesel.
  9. Government Regulations: In some regions, government regulations and emissions standards have encouraged the use of diesel engines in commercial vehicles. These regulations have prompted advancements in diesel engine technology to meet stringent emissions requirements.
  10. Innovation: Diesel technology has continued to evolve, with improvements in engine efficiency and emissions control. This has allowed diesel engines to remain competitive and meet environmental standards.

It’s worth noting that there is growing interest in alternative fuels and propulsion technologies for commercial vehicles, including natural gas, electric, and hydrogen-powered vehicles. Concerns about air quality, emissions, and environmental sustainability are driving research and development in these areas, and some commercial vehicle operators are exploring cleaner alternatives to diesel.

However, the widespread adoption of alternative fuels and technologies in the commercial vehicle sector may take time due to the substantial infrastructure changes, cost considerations, and technological developments required for a successful transition. Diesel’s dominance on the road for commercial vehicles.

There are several compelling reasons that have kept diesel in the driver’s seat for so long. So, let’s break down why diesel-powered vehicles have been a top choice for Indians for decades.

Diesel is economically feasible and easy to find. Its engines have a long lifespan and require less maintenance, and, most importantly, it works very well for trucks carrying heavy loads over long distances , making it an efficient fuel.

These reasons are enough to convince people to keep using diesel!

But here’s the catch: With the rollout of Bharat Stage VI emissions standards, diesel engines are now facing strict requirements to reduce emissions of carbon dioxide, toxic gases, hazardous pollutants, and more.

And here’s the deal: all fuels are now as unclean or as clean as the other,  as pointed out by the executive director at Tata Motors.

In response, major automakers have made heavy investments in upgrading their diesel engines to meet these latest emissions standards.

 

 

And diesel, interestingly, possesses an inherent advantage in meeting lower CO2 emission requirements and is a more efficient fuel compared to petrol, as it releases less CO2.

Yet, there’s a looming concern. If further taxation burdens are placed on diesel, this could spell trouble for commercial vehicle makers, potentially bringing degrowth to the segment or even decline.

 

 

Do you think, it’s time to say goodbye to diesel forever?

Written By Shivani Singh

By utilizing the stock screenerstock heatmapportfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment decisions.

Why Switching From Diesel is an Expensive Deal for India?

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