Cut diesel engine, car output due to low demand: Maruti

India's largest passenger car maker Maruti Suzuki has reduced production of diesel engines as well as diesel powered cars due to a fall in demand, Chairman RC Bhargava, said on Wednesday.

Demand for diesel cars has dropped to 25,000 while the company has a production capacity of 42,000 vehicles, and so it was decided to operate at two shifts instead of three at its Manesar plant, he said, adding that the reduction in petrol-diesel price gap is the key reason for the drop in demand.

The petrol-diesel price differential is down to Rs 18 in several circles, compared to Rs 27 at its peak, he said. The gap has been narrowing since the government allowed public sector oil marketing companies to hike diesel prices in small amounts every month.

Bhargava said that the price differential will vanish maybe in a year or two and so diesel cars are not selling as fast as they were till a few months ago.

Maruti Suzuki's sales in June declined 13 percent year-on-year to 84,455 units. Sales were down across its portfolio. Even, the DZire compact sedan, which has been among its top selling model, saw sales fall near 9 percent and sales of the Ertiga multi-utility vehicle, another successful model, also slipped 11 percent.

Despite the decline in wholesale demand (cars shipped to dealers), Bhargava says retail sales are rising month-on-month and so is hopeful that retail sales growth this year will be 5 percent.