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Slowdown in CNG Car Sales in H1 CY2023

The market for Compressed Natural Gas (CNG)-powered cars and SUVs in India witnessed a slight decline in sales during the first half of calendar year 2023. With a total of 156,938 CNG vehicles retailed from January to June, marking a 5 percent decrease compared to the same period in CY2022. Despite this, the introduction of new models and improved availability of CNG components is expected to drive better numbers in the second half of CY2023. This blog delves into the details of the CNG vehicle market and explores the performance of leading Original Equipment Manufacturers (OEMs).

June 30, 2023 | 3 min read | Car & Sedans

The recent launch of the Hyundai Exter mini-SUV on July 10 has expanded India's market for CNG-powered vehicles. Out of the 22 CNG passenger vehicles sold in India, the Exter is only the second compact SUV to receive the CNG treatment, following the Maruti Brezza. However, the CNG vehicle segment experienced a 5 percent decline in retail sales during the first half of 2023.

According to data from the Vahan website (LMV and petrol-CNG), cumulative retail sales of CNG passenger vehicles from January to June 2023 reached 156,938 units, indicating a 5.47 percent year-on-year decrease compared to April-June 2022 (166,023 units). This decline could be attributed to supply constraints for CNG parts, which have impacted vehicle deliveries to showrooms.

The leading OEMs in the CNG vehicle market include Maruti Suzuki India, Hyundai Motor India, Tata Motors, and Toyota Kirloskar Motor. Maruti Suzuki, with its extensive range of 12 CNG models, dominates the market, having sold 115,484 CNG variants, accounting for 16.60 percent of its total PV sales. However, its H1 CY2023 CNG sales experienced a slight decline of 3.87 percent compared to the same period the previous year. Hyundai Motor India sold 22,625 CNG units, representing an 8.65 percent share of its PV sales, but also suffered an 11.61 percent YoY decline. Tata Motors witnessed a 17 percent YoY decline, with 15,965 CNG units sold in H1 CY2023. Toyota Kirloskar Motor, being a recent entrant in the CNG market, registered positive growth.

Despite the marginal decline in sales during H1 CY2023, the CNG vehicle sector continues to gain popularity due to its cost-effective and eco-friendly nature. CNG-powered vehicles offer significant savings in comparison to petrol or diesel models, especially given the high fuel prices in India. Currently priced at Rs 79 per kg in Mumbai, CNG is Rs 27.49 cheaper than petrol and Rs 15.27 cheaper than diesel.

While CNG vehicles boast lower running costs and better fuel economy, they face challenges such as the limited number of refueling stations and the need for careful route planning during highway driving. However, plans are underway to double the existing number of CNG stations from 4,500 to 8,000 within the next two years. Additionally, servicing costs for CNG-powered cars are higher compared to their petrol counterparts, with the CNG filter requiring scheduled replacement in factory-fitted CNG kits.

CNG vehicle manufacturers also face competition from the rapidly growing electric vehicle (EV) market. Although EVs initially carry a higher price tag, the lower long-term ownership costs make them an attractive proposition for consumers. With governments offering subsidies, the expansion of EV charging infrastructure, and financial institutions supporting the EV growth story, the CNG sector may experience a potential loss of market share to the EV segment.

While CNG car, SUV, and MPV retail sales experienced a temporary slowdown during the first half of CY2023, prospects are expected to improve in the coming months. The decline in sales can be attributed to supply constraints for CNG parts. However, the CNG vehicle market continues to grow steadily, driven by its wallet-friendly and eco-friendly nature. As OEMs expand their CNG product portfolios and the infrastructure for refueling stations improves, the CNG sector is poised for a rebound. Meanwhile, the competition from the EV segment adds an interesting dynamic to the future of alternative fuel vehicles in India. Stay tuned for regular updates on this evolving market.