Diesel Engines and their market share in India
The diesel engine market at large designates the use of internal combustion engines for power generation. At present, reciprocated engine based gensets are highly saleable and globally acclaimed least expensive distributed power generation technologies. In India as well like other global countries , diesel engine leads the market followed by gas and duel fuel engines. In India the bio-fuel applications and heavy fuel are only on pilot, basis the availability concerns. Whereas on the other hand ease of fuel availability and comparatively lower cost for generating power has increased the supremacy of diesel engines in the country over the past 7-8 years.
The market size of diesel engines in India has shown continuous improvements from 2009-10 levels where in the market size has grown from 0.31 million units to 0.44 million units in 2013-14 and thereon to 0.50 million units in FY’15. The same can be observed in Exhibit 01 as well.
Key Drivers Pulling the Growth of Diesel Engines in India
The diesel engine market has a wide arena to grow in India in coming years. Given the expansion in the output of motor vehicles , increasing requirement of power back up solutions in lieu with fostering commercial and industrial activities, development in the construction segment and many more factors like these shall together be responsible for scaling up the sales of diesel engines in India in coming years. It is pertinent to note that the sales volume of diesel engines are projected grow at a rate of 8-9% from 2016-2020. Given below are some key and trends displayed by the diesel engine market in India for 2014-15 , which clearly justifies the futuristic business case for same.
1. Indian Diesel Engine Industry Engine is Perfect
Indian diesel engine market is characterized by (a) pricing power, (b) strong technology led entry barrier –which needs to be constantly upgraded and (c) not so easily replicable distribution channel. The industry dynamics are ‘robust and firm’ by retaining pricing power & discipline even in this tough environment. Technology and distribution network are very high entry barriers for any new player; sheer price competition will not serve business ambitions.
2.Strong Economic Growth Trajectory Build Up
The Indian economy is now depicting some positive signs towards recovery. It was anticipated that post general elections the economy will fall back to its normal growth rate of 7-8% on annual basis gradually, which so far seems on track and hence promise for the gensets market. This scenario will aid the volumes as in the case of US it did. Even in India, the case of metro cities wherein the economic development is better the demand for reciprocating engines is high not only for the main city but also for the satellite cities. For example Delhi & Mumbai, and with Central Government stress on creating 100 smart cities coupled with facelift of other tier 2 & tier 3 cities it is most likely to improve the demand of engines and a growth of 13% annually till 2020 is almost certain.
3.Power Deficit Scenario in India Still Persistent
India despite having an installed capacity of over 250 GW still experiences peak deficit and is boon for diesel and gas engines market in India. Although the deficit scenario keeps on changing and is very dynamic depending upon on the seasonal variations, which can be observed in Exhibit 03.
4. High Replacement Demand
The diesel engines have been sold in India for decades and their replacement demand is another facet which has huge potential. Usually the average life of a gensets typically is 20 years (depends upon the usage levels). This would also aid in growth over long-term, thereby further allaying concerns about long – term growth prospects of engines in India.
Future Outlook of Diesel Engines in India
The reciprocating engine market share is likely to maintain almost the same sharing pattern till 2020 with diesel engines would lead by significant margin owing to ease of availability and relatively low pricing. The share is being depicted in Exhibit 04.