Maruti extends its diesel engine contract with Fiat

Considering the rise in demand for diesel powered cars in the country, Maruti Suzuki India Limited has now extended its diesel engine sourcing deal with Fiat India, arm of Italian carmakers Fiat SpA, for a further three years. The ace manufacturer has been sourcing 1.3-liter Multijet diesel engine from Fiat since 2011, and the current was due to expire in the year 2015.

The Fiat sourced 1.3-liter engine is the most widely used engine in the country, not just Maruti, Tata also uses the same engine for its Indica Vista and Manza. While Maruti's Swift, Swift Dzire, Dzire Tour, Ritz, Ertiga and the SX4 comes powered by the same diesel unit. Diesel variants of all these products, accounts for about for 33 percent (340,000 units) of brand's sales in last fiscal year (which translates to about 340,000 units).

After a sudden increase in demand for diesel cars, in 2011 Maruti agreed to buy 1,00,000 engines per year from Fiat. And till date, Fiat Powertrain Technologies SpA has supplied a total of 2,00,000 diesel engines to the Indian auto major. Additionally, Maruti manufactures the same diesel unit at its facility in Manesar, Gurgaon under a licensing agreement from Fiat.

“Diesel cars will continue to be in favour, given the price gap with petrol and better fuel efficiency,” said Puneet Gupta, principal analyst at sales and market research firm IHS Automotive. “Moreover, given the demand swings, it makes better sense for Maruti to source the engines rather than invest in creating its own capacity,” Gupta added.

Though Maruti is also readying its new diesel engine family and the first of its 800cc member will power the company's successful hatchback Celerio and upcoming Y9T LCV (Light Commercial Vehicle). For this, the company has also set up a diesel engine plant in Gurgaon, which will make additional 1,50,000 units of the new diesel family.