The surge in diesel vehicle demand has prompted the companies to explore options such as developing new engines as well as buying these from other companies.

While diesel models constitute about 20-25 per cent of the total demand for Maruti Suzuki, its share has been on a surge over the past few months following a widened price gap between petrol and diesel.

Maruti has thus asked its diesel engine and transmission-producing joint venture company, Suzuki Powertrain India, where Maruti holds 30 per cent equity stake, to double efforts to develop all-new a diesel engine range. Suzuki Powertrain India, which exports engines to Suzuki's European operation, had recently expanded its capacity by 25 per cent to 300,000 engines per annum.

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While demand for Maruti's diesel variant exists for eight of every 10 models, which otherwise is available in both fuel formats, the company is struggling to extend the diesel offering to more models.

Maruti has strapped its only diesel engine, the 1.3 litre, built under technology licence agreement with Fiat and General Motors, onto four models  --  Ritz, Swift, Swift DZire and SX4. It is also considering buying engines and transmissions from Fiat India Automobiles, a joint venture company between Tata Motors and Fiat Group Automobiles S P A.

On the option of buying engines from Fiat, Shinzo Nakanishi, managing director, Maruti Suzuki India, said, "That is one of the solutions. The engine is the same, but technically it is not easy as Fiat has tuned its engine differently than we have for ours. We have asked Suzuki Powertrain to develop new engines for us."

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"Since diesel pricing policy is not clear, we can not make huge investments to set up capacities. If we make investments tomorrow and the government changes the pricing of diesel and the diesel demand goes down, our investment will get nullified. Now our problem is when to make that decision," said Nakanishi.

Fiat's engine and transmission making factory at Ranjangaon near Pune, lies grossly under-utilised because of low offtake by both companies due to reduced demand. Fiat is planning to sell engines to other companies, including the 1.3 litre diesel engine to improve utilisation.

Other companies such as General Motors and Ford Motor Company have, however, gone ahead and set up hybrid engine-making facilities in India which can build diesel and petrol on the same manufacturing line. Both General Motors and Ford, which are enlarging their diesel offering, can tune their engine type output according to the market demand.