Photographer: Kuni Takahashi/Bloomberg

Mahindra Banks on Gasoline Model as India Sours on Diesel Cars

  • Top court temporarily banned sale of some diesel cars in Delhi
  • Mahindra seen worst hit because of its diesel SUV lineup

A cheap gasoline-engine crossover may turn out to be the most important model for India’s biggest SUV maker this year amid uncertainty whether a ban on the bulk of its diesel lineup will be extended.

Mahindra & Mahindra Ltd. will on Friday begin sales of the KUV100, a compact SUV that local car magazines estimate will cost in the range of 400,000 rupees ($6,000) to 500,000 rupees. It is the only model that the automaker offers with a gasoline engine, a valuable attribute now that most of its large diesel off-roaders are barred from sale in New Delhi through March by the country’s highest court.

Buyers of small cars in India tend to opt for gasoline cars as they generally cost less and are cheaper to maintain, more so after the government scrapped subsidies for diesel fuel at the end of 2014. With the fuel now blamed by India’s top court for worsening the smog in the capital city, more may shift to petrol-run autos to avoid the possibility of further restrictions.

“If priced right, the KUV100 should be a best seller,” said Basudeb Banerjee, an analyst at Antique Stock Broking in Mumbai. “With all the uncertainty around diesel, a gasoline model couldn’t have come at a better time for Mahindra.”

Pravin Shah, head of Mahindra’s automotive division, didn’t immediately return calls or reply to an e-mail seeking comment on the company’s plans for more gasoline models. The company will announce the price for the KUV100 at an event on Friday.

Mahindra’s competitors have introduced more gasoline options over the past three years, a period that coincided with a slide in the SUV maker’s market share. Ford Motor Co. introduced the EcoSport in June 2013, while Hyundai Motor Co. rolled out the Creta compact SUV two years later.

Diesel’s reputation has come under assault after Volkswagen AG admitted last year to fitting about 11 million vehicles worldwide with cheating devices to beat emission tests.

Last month, India’s Supreme Court banned diesel cars with engines larger than 2 liters from being registered until March 31 in the capital, which was ranked the most polluted city in the world according to the World Health Organization. The federal government this month announced it will implement more stringent emission norms four years ahead of schedule from April 2020.

With the KUV100 -- the KUV stands for Kool Utility Vehicle -- Mahindra has set its sights on attracting young, first-time Indian buyers. The model will compete against Ford’s EcoSport and Maruti Suzuki India Ltd.’s soon-to-be introduced Vitara Brezza compact SUV.

“Diesel has had its day,” said Deepesh Rathore, director at Emerging Markets Automotive Advisors based in London. “With no gasoline engines in their portfolio, Mahindra has to act now.”

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