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Mahindra looks at petrol engines after temporary diesel ban

MUMBAI (Reuters) - Automaker Mahindra & Mahindra LtdMAHM.NS is developing petrol engines for its existing vehicles after the Supreme Court temporarily banned the sale of large diesel cars in New Delhi to fight toxic smog.

The logo of Mahindra & Mahindra Ltd is pictured on the pocket of a salesman's shirt as he poses inside the company's showroom in Mumbai August 13, 2013. REUTERS/Danish Siddiqui/Files

Mahindra, India’s top sport-utility vehicle (SUV) maker, is among the worst hit by the ban because it only has diesel SUVs, several with engines of more than 2,000 cc in capacity that cannot be sold in the capital until March 31.

“We are looking at options ... we will have a petrol option available in most of our vehicles in the medium term,” Pawan Goenka, Mahindra’s executive director, told reporters on Friday.

The ban ordered by the Supreme Court on Wednesday has unsettled India’s car industry. It says an uneven, haphazard policy makes it hard to plan investment and allows damaging regulatory arbitrage across states.

A World Health Organization study showed 13 of the world’s 20 most polluted cities are in India, and Delhi tops the list.

Dealers selling cars made by Mahindra and rivals such as Toyota Motor Corp now have hundreds of unsold vehicles they will need move to dealerships elsewhere in the country, or return to the makers.

Mahindra has more than 1,000 unsold cars with its dealers in Delhi and the surrounding region, where the ban is applicable, Goenka said. The automaker makes about two percent of total sales in the area.

On Friday, Mahindra unveiled its first petrol engine, developed at a total cost of 5 billion rupees ($75.4 million), for a new compact vehicle, KUV100, that will be launched in January. It is now working on petrol engines for its bigger vehicles including the Scorpio and XUV500.

For the automaker, the ban is also a chance to push sales of its electric cars.

Mahindra sells three electric cars in India and has three in the pipeline but would like higher government incentives so it can reduce the price of the cars and spur demand, said Goenka.

“We have to look at the long-term view that the court will take,” he said.

($1 = 66.3397 Indian rupees)

Writing by Aditi Shah; editing by Sumeet Chatterjee and David Clarke