Would buying diesel car still make sense in 2019?

About a decade ago, the price difference between a litre of petrol and diesel was about 20 rupees. Many car buyers had to compute their estimated usage and if it is more than certain number of kms- like 1500 kms per month, it was believed that buying a diesel car is more economical on a per km basis. Diesel variants would cost easily 10-20% more than their equivalent petrol variants and this extra spend was justified in per km savings since diesel was lot cheaper.

Once government mulled charging an one-time extra tax on diesel vehicles but that hasn’t materialized. Government is gradually withdrawing any subsidy on Diesel and narrowing the gap between diesel and petrol. The gap between a litre of petrol and diesel is now just about 5 rupees.

Is it still worth buying diesel cars?

• You’ve to spend more upfront-
• Due to higher purchase cost, your EMI, insurance premium, maintenance cost and total cost of ownership is going to be more than corresponding petrol variant
• Fuel efficiency of petrol cars have improved over time but diesel cars still offer a bit better fuel economy than petrol
• Most brands are offering automatic only in petrol (mainly due to cost considerations)

With this, it looks like a no brainer- petrol is way better today than a diesel car

Let us do some comparison

	Nexon Petrol XZ	Nexon Diesel XZ
Ex-showroom price	8.16 lakhs	9.17 lakhs	1 lakh diff
Approx on road price	10 lakhs	11 lakhs	+20%
Claimed Fuel Economy	17.8 kmpl	24 kmpl
Expected practical FE	15 kmpl	20 kmpl	20% mark down
Fuel cost (Chennai, 26 dec)	72.41	67.38 per litre	5.03 Rs difference
Monthly expense (1000 kms per month)	4800	3370	1400 per month saving
Monthly expense (2000 kms per month)	9600	6740	2800 per month saving

In an year, at 2000 kms a month saving, diesel car will save 2.8k per month*12 months= INR 34k. At this rate, it takes about 3 years to recover the one lakh rupees extra that you paid for a diesel car. In reality it may take about 4 years to break even, as you will be paying a higher EMI, higher insurance premium and higher bill at service station. At a lower usage of 1000 kms a month, you will take roughly 7-7.5 years to break even-just not worth it. Only if you’re using more than 3000 kms a month, you will break even after 2.5-3 years, which still makes sense. So at this moment taxi operators would still find it economical to stick to diesel variant. [Nexon detailed review]

Let us repeat for a cheaper car- Tata Tiago

	Tiago Petrol XZ	Tiago Diesel XZ
Ex-showroom price	5.32 lakhs	6.15 lakhs
Approx on road price	6.5 lakhs	7.4 lakhs	+20%, 90k  diff
Claimed Fuel Economy	23.84 kmpl	27.28 kmpl
Expected practical FE	20 kmpl	22 kmpl	20% mark down
Fuel cost (Chennai, 26 dec)	72.41	67.38 per litre	5.03 Rs difference
Monthly expense (1000 kms per month)	3620	3062	550 per month saving
Monthly expense (2000 kms per month)	7240	6124	1100 per month saving

Tiago Diesel will take 6.8 years to recover the 90k price difference w.r.t petro variant, at 2000 kms usage per month. Add some buffer for higher EMI, insurance n maintenance, we can consider 7.5 years

Let us repeat for one more car- bit expensive one- Jeep Compass, base variant

	Compass Sport 1.4 petrol	Compass Sport 2.0 Diesel
Ex-showroom price	15.44 lakhs	16.64 lakhs	1.2 lakh diff
Approx on road price	18.5 lakhs	20 lakhs	+20% (1.5 lakhs)
Claimed Fuel Economy	14.3 kmpl	17.1 kmpl
Expected practical FE	11 kmpl	13 kmpl	20% mark down
Fuel cost (Chennai, 26 dec)	72.41	67.38 per litre	5.03 Rs difference
Monthly expense (1000 kms per month)	6600	5200	1400 per month saving
Monthly expense (2000 kms per month)	13200	10400	2800 per month saving

Jeep Compass Sport Diesel will take  4.5 years to recover the 1.5 lakh price difference w.r.t petrol variant, at 2000 kms usage per month. Add some buffer for insurance, EMI, maintenance extra spend and you can consider a practical break even period of 5 years

Summary: Break even period (time taken to recover extra amount paid for diesel car)

#	Car	Price range	Usage: 1000 kms per month	Usage: 2000 kms per month	Usage: 3000 kms per month
1	Tiago	5-7 lakhs	15 years	7.5 years	4 years
2	Nexon	9-12 lakhs	8 years	4 years	2-2.5 years
3	Compass	17-22 lakhs	10 years	5 years	2.5-3 years

Plus following factors are also playing it against the diesel cars

1. Diesel is more polluting than petrol
2. With BS VI emission norms kicking in 2020, Diesel car is said to be about 2.5 lakh rupees more expensive than corresponding petrol variant. [Source]
3. Resale value of current generation BS IV diesel cars will be lot lower after 4-5 years
4. Renewing Diesel cars beyond 10 years might be tough in metros, as due to high pollution govt may force scrapping of old diesel cars. Petrol cars may typically be allowed till 15 years.
5. Hard to predict how fuel prices will swing in future-will the price difference narrow to 2-3 rupees or will it widen to 10-15 rupees? Only time will tell. We’ve to plan based on information available at hand at the moment.

Considering this, unless you've an extremely heavy usage of 100+kms a day, there is no reason to buy a diesel car in 2019. The 1500 kms earlier monthly usage cut off has simply doubled. 100kms+ per day on an average is bit too much for most personal use- even assuming 50kms a day office run for 20 days + a few long weekend drive, most of us would not be clocking more than 2000-2500 kms a month. Let me know what you think. Would you still consider a diesel car?

Disclaimer: on-road price above is approximate, varies city to city and depending on variants. Fuel price also varies from city to city- do your own math for your city, car you have in mind and your expected usage.

The problem:

Automobile industry takes forever to respond to market demand. For example, Toyota had a petrol variant of Innova, which the discontinued sensing almost everyone is opting for only diesel. Now a petrol Innova or even petrol Fortuner would make sense, but the decision to roll out takes years. It is relatively easier for Toyota because they have petrol variants on sale in various Asian markets- they don’t’ have to do R&D and build petrol engine from scratch.

For others like Mahindra, who have invested heavily in diesel engines, sudden shift to petrol is very tough. So they will have to enter into partnerships with other manufacturers for quick time to market. Mahindra already has tied up with ford to sell ford cars in Mahindra showrooms- may be this will extend to engines?

Another concern is, government’s moves are unpredictable- will the trend sustain for years to come? What if by December 2019 Diesel is 100 rupees and petrol is 150 rupees a litre? We will regret our decision to buy a petrol car?