MUMBAI, Feb 8: Automobiles Peugeot of France has entered into an initial memorandum of understanding with Maruti Udyog (MUL) to fit its TUD5 diesel engine in the Esteem. Trials are expected to begin soon. With this, Maruti's entire range of vehicles, barring the popular 800cc version, will have been dieselised.Peugeot had met Maruti officials a fortnight ago to discuss the possibilities of the TUD5 for the Esteem, and the two reached an agreement recently. Observers say fitting the engine will take time and that it may well be during next year. Maruti officials refused to comment on the matter.
The French automaker has arranged through its subsidiary, Peugeot Citroen, to supply 10,000 built-up TUD5 engines during calendar 1998 and 1999 to Maruti Udyog. These will apply to the range comprising the Zen, Esteem, Maruti 1000 and Gypsy. The "proportionate allotment" will depend on the demand for each of these vehicles.
As things stand now, it seems unlikely that the Gypsy, fitted with the TUD5, will makeits entry as there have been mild hiccups in the form of mounting the engine. The Zen is on schedule and should be part of the roads by May.
Its nearest rival will be the 1700cc diesel Uno, which may make an earlier debut and could well be less expensive.
The move to dieselise the Esteem, analysts say, is a wise move to ensure that the car continues to lead the mid-size segment. Over the last four months (between October 1997 and January), total sales of the Esteem have totalled 5,817 units, which is more than the combined sales of the Cielo (2,576 cars inclusive of the spurt of 906 in January following the price cut), Astra (1,588 cars) and the Escort (1,500).
However, as sources indicate, this may not continue right through the year if consumer reaction to the new Cielo prices is any indication. Dealers in Delhi have reported "a phenomenal response", which could translate into average monthly sales of 1,500 cars in February and March.
This apart, the other threat to the Esteem's monopoly could comefrom the Honda City whose 1.3 litre version will have an on-road price tag of Rs 5.8 lakh in Delhi. The more expensive Mitsubishi Lancer follows in August with a diesel alternative, which means a tough fight for the Esteem during 1998-99. In the midst of this, it remains to be seen if the Telco car, with petrol and diesel versions, can eat into the mid-size segment, too.
The dieselisation of the Esteem is, hence, a logical step by MUL to ensure that its product does not lose out to factors like lower price (Cielo), brand image (Honda) or availability of the diesel alternative (Lancer, Escort, Astra and, possibly, the Telco car). The TUD5 engine, according to analysts, offers the best diesel engine and this was especially apparent in the case of the Peugeot 309 GLD whose production has now come to a halt.
If everything goes according to plan, Maruti Udyog will have a complete range of diesel options by the end of next year. Incidentally, that is the time when Hyundai Motor India will have its new mid-sizecar, the successor to the Accent, ready and fitted with the same TUD5 engine.
Snapping out of stupor
That competition has jarred Maruti Udyog from its complacency is apparent. But probably more critical for profitabilities is its latest move to offer a diesel variant for the Zen, Gypsy and Esteem models. Interestingly, this is the first time that MUL has felt the need for a diesel vehicle in its stable. This, analysts say, could well be a turning point for the company. Suzuki has always in the past cited international environment norms against diesel vehicles, and stalled any such move. Why then this turnround now?
The answer lies in the aptly-labelled "car wars" which is fast becoming a numbers game to ensure viable margins. The diesel variants will give Maruti a whole new line of what could be called flank brands - strengthening its product stable. Peugeot could also be going aggressively on the TUD5 as the 309 has practically, for all purposes, stopped production.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
