In recent times, the CNG (Compressed Natural Gas) segment of automobiles has gained significant attention from auto companies. This shift can be attributed to various factors, including the development of improved infrastructure, rising demand, and government initiatives aimed at reducing gas prices for consumers. These elements combined are expected to drive the market for CNG vehicles in India.
Maruti Suzuki, the largest car manufacturer in India, holds a dominant 70 percent market share in CNG cars. The company anticipates a remarkable 45 percent increase in CNG car sales in the country. In the previous fiscal year (FY23), Maruti Suzuki sold 325,000 cars and expects to achieve sales figures ranging from 450,000 to 475,000 cars in the current fiscal year.
Tata Motors, another prominent player in the Indian automotive industry, is actively engaged in developing new products in the electric vehicle (EV) and CNG segments. The company has recently introduced CNG versions of popular models like Altroz and is even considering launching a CNG variant of the highly popular Tata Nexon SUV, as reported by trade publications.
The emergence of better infrastructure has been a driving force behind the growing preference for CNG. In 2023, Maruti sold over four times the number of CNG cars compared to FY17, reflecting a substantial shift in consumer behavior. CNG offers a significantly lower cost per unit of fuel compared to petrol, and CNG vehicles provide higher mileage efficiency. Despite these advantages, CNG did not gain immediate traction when Maruti initially introduced CNG cars in 2010 due to a lack of infrastructure and availability of CNG fueling stations. However, the scenario has changed with the government’s efforts to expand the number of dedicated gas outlets in India. The number of stations focused on selling natural gas has grown from 900 in 2014 to around 1,500 in 2021, with further growth anticipated.
Previously, existing petrol pumps were reluctant to add CNG due to the need for separate islands and dispensers. The investment required was difficult to recover due to lower demand. However, as the number of CNG vehicles increased and sourcing CNG through city gas distributors became more feasible, petrol and diesel dispensing stations started offering CNG as well.
Changes in the government’s fuel pricing mechanism have contributed to lower costs for consumers, making CNG an attractive option, particularly for auto rickshaws and cabs. Local governments have also prioritized cleaner rickshaws and, in some cases, imposed bans on diesel licenses. CNG and electric vehicles have become more appealing due to their relatively lower running costs, especially when conventional fuel prices are high. However, the higher upfront cost of purchasing a CNG car or retrofitting an existing vehicle with a CNG kit has been a deterrent for some buyers. The upfront price difference between a petrol car and a CNG car is nearly Rs 1 lakh. Nevertheless, as disposable incomes rise, CNG cars could become more affordable for a wider population.
In the past, the availability of factory-fitted CNG cars was limited to a few models offered by Maruti and Hyundai. Mahindra introduced its first passenger car with a CNG option in 2018, and Tata Motors followed suit in 2021. The focus has primarily been on mass-market vehicles with lower upfront costs, possibly due to the price-conscious nature of the average CNG customer and the desire to maintain brand image. CNG usage has typically been associated with auto rickshaws and cabs, and luxury car brands have been hesitant to associate themselves with this image. Additionally, the installation of CNG tanks significantly reduces the storage space in vehicles. However, as the government continues to promote cleaner fuels, companies are phasing out diesel options and introducing CNG, hybrid, and fully electric variants of popular cars.
With the rapid expansion of dedicated gas infrastructure, increasing demand, and government initiatives aimed at reducing gas prices, the CNG segment of the automobile industry is expected to witness substantial growth in the coming years.
