Mahindra & Mahindra, the country's biggest sports utility vehicle maker, plans to develop a range of petrol engines to fuel growth. The move comes on the back of the automobile company's plan to foray into the US market.

Mahindra & Mahindra, the manufacturer of Scorpio and the biggest selling multi-utility vehicle, Bolero, has been selling vehicles strapped with diesel engines. It now plans to incorporate petrol engines for its Xylo range of multi-purpose vehicle later this year, sources closely involved with the development said.

AVL of Austria will develop the petrol engines for the company, which may range in capacity from 1.5 litres to 2.2 litres. Earlier, the company had announced plans to develop the engine jointly with a Europe-based engine-maker.

The petrol version of the Logan sedan, which Mahindra sells from its joint venture company Mahindra Renault, has been developed by Renault.

"There is a lot of demand for fuel-efficient, but powerful petrol engines in the markets of the United States, Europe, West Asia and Africa. We will explore those markets with our new range of petrol engines, which are developed with the assistance of AVL," said a senior M&M executive.

The Xylo, which is the home-grown SUV maker's first indigenous product after the Scorpio, which was launched six years ago, will have an option of the petrol engine along with the traditional diesel engine. In addition, the company plans to use the petrol engines for more than just one application.

"Financially, it is never a viable business proposition to use an engine only for a single product. We will use the same engine for different products, even for commercial vehicles, so that our cost of investment gets recovered swiftly," added the executive.    

Analysts say Mahindra's strategy to sell petrol vehicles may be aimed at pricing the automobile at a competitive rate compared with that of its diesel variants. The move may also be aimed at wooing younger customers, who prefer more power. Petrol variants are always cheaper than their diesel counterparts by Rs 1-1.5 lakh (Rs 1,00,000-Rs 1,50,000).

Mahindra aims to price Xylo much lower than Toyota's Innova to wean away customers from the Japanese company, though it has not announced a price for the new vehicle. Innova's diesel engine model is priced between Rs 7.3 lakh and Rs 10 lakh (Rs 7,30,000-Rs 1 million, ex-showroom Mumbai).

Besides the price difference, petrol engines are comparatively less noisy and also emission-friendly as against conventional diesel engines, which will help the company capture the market share in the US. Petrol engines are also lighter in weight.

Mahindra said its work on new projects, including the SUV, which will have a premium tag, is on schedule and will be the company's next big launch after the Xylo. The premium SUV is expected to be priced higher than the Scorpio and may be launched in 2010.