Auto industry views Gadkari's diesel tax hike proposal as a wake-up call

With the Union Minister for Road Transport and Highways, Nitin Gadkari, mulling the levy of a 10% GST or a pollution tax on diesel vehicles, auto industry leaders have dubbed this as a "wake-up call to transition to green fuels" and a "radical move" for industry members still working with a diesel-heavy portfolio.

Speaking at the 63rd SIAM Annual Convention in New Delhi, he later clarified that "There is no such proposal currently under active consideration by the government."

Homegrown automaker Mahindra & Mahindra (M&M), has one of the most extensive portfolios of diesel vehicles in India, with diesel accounting for more than 80% of the company's commercial vehicle sales in FY23, whereas in the case of Tata Motors, it accounted for 15% of its overall CV sales last year.

Veejay Nakra, CEO of M&M's Automotive Division and a member of Mahindra's Group Executive Board told Autocar Professional that Gadkari's message is a warning to the industry to accelerate its transition to alternative fuels.

"It is a larger message to the industry to transition to alternative fuels, and I see it being only a future proposal, rather than the tax taking effect immediately. All automakers are making efforts in the endeavour to transition towards greener fuels by broadening their product lines to include CNG, hybrid, electric vehicles, or ethanol and biofuels." 

Nakra further stated that M&M has proven its commitment to moving towards EVs. "Electrification is unavoidable, and Mahindra has accepted it by launching its very ambitious and aggressive 'Born Electric' initiative, which will see numerous body designs spun off its INGLO platform dedicated to EVs. In terms of our existing diesel portfolio, we are now converting existing diesel vehicles to electric," he said.

Hisashi Takeuchi, Managing Director and CEO of Maruti Suzuki India, exclusively told Autocar Professional that the Minister's hint of imposing a 10% tax on diesel is a "radical move."

"At the recently concluded G20 summit, the country spoke about its global commitment towards decarbonisation. The Minister's remarks are only urging the industry to accelerate the change," Takeuchi added.

Baba Kalyani, Managing Director, Bharat Forge, echoed Gadkari's comments on moving towards a diesel-free world, noting that biofuels will play a crucial part in the country's energy transition and that automakers are pursuing this mission with zeal.

Mercedes-Benz intends to convert one out of every four luxury vehicles to electric vehicles over the next four years. Santosh Iyer, MD of Mercedes-Benz India, responded to the government's proposal to tax diesel vehicles by saying, "We have all propulsion technologies in our portfolio, including diesel, petrol, and electric. We provided the customer with a number of options to choose from based on their requirements."