There Is A Fuel Shift Happening, But The Diesel Story Is Far From Over
While diesel growth may waver in the short term, its long-term utility remains unquestioned. At least for now.
Most Indians are spotting more electric vehicles (EVs) on the road. Be it electric cars, e-rickshaws or receiving deliveries on e-bikes, EVs are visibly and statistically growing in India. Yet, the fuel mix is not changing drastically.
Even as fewer people are buying diesel cars, when it comes to long-haul transport, diesel or HSD is still ruling the fuel game.
The ‘death of diesel’ debate had come to the fore as FY25’s diesel sales grew a mere 2%, which is less than the 4.3% growth seen in FY24 — and much slower than the 12.1% seen in FY23, as per data by the Petroleum Planning and Analysis Cell (PPAC).
Some experts point to a variety of factors at play in diesel sales. India's GDP is projected to grow at around 6.5% in FY25, which was at 8.2% in FY24, leading to a slowdown in consumption.
“The slowdown in diesel consumption growth seems to reflect the broader cooling of economic activity. Even a small dip in freight activity can significantly reduce overall diesel consumption,” said Kshiteej Mishra, practice member, mobility, energy and transportation at Praxis Global Alliance.
A few others, however, ascribe it to the cyclical nature of diesel sales rather than a major shift in the way the product is consumed.
“If you look at the last 8-9 years, the CAGR (compounded annual growth rate) of diesel has always been around 2%. The year of FY23 was a blip year due to the post-pandemic consumption, so we should not compare it to that. If you see, April 2025’s sales have already grown at 4%,” explains an academic expert who tracks fuel consumption.
The core sector growth slowed to an eight-month low in April of 2025. Three out of eight sectors — crude oil production, refinery output and fertilisers — contracted in April.
The data indicates that farm production, as well as fuel consumption, has been slowing for a while now.
This is perhaps an indicator of why diesel demand has been low, though it picked up comparatively in April 2025.
Diesel keeps the economy running, and might continue to do so for a long time now. While a few alternatives are chipping away at some of its utilities, green and clean fuels have a long way to go before there is a structural shift.
Yet, in the wake of global tensions as well as consumption worries, diesel growth might waver in the short term, even as its long-term utility remains unquestioned at least for the next six to seven years.
What’s Diesel Used For?
In India, diesel is consumed by a variety of consumers. The transportation sector (including cars, buses, trucks, and even shipping and railways) accounts for around 70% of total sales.
The next biggest sector is agriculture, which accounts for a tad over 10% and cyclicality mostly comes from this sector, which could have also impacted FY25 sales. In FY26, industry experts see diesel sales improve on the back of a robust harvest season.
Diesel is also consumed to run power gensets, industrial uses like lighting, mobile towers and miscellaneous users like crushers, construction, drilling and so on.
“While diesel use typically tracks GDP trends, the softer but stable economic growth outlook suggests that other factors — such as the rising adoption of alternative fuels — are also contributing to weaker diesel demand,” said Mishra.
Big Cars & Better Fuels
The sector where the hegemony of diesel has been reducing rapidly is passenger cars.
Every year, fewer and fewer diesel cars are being purchased. So much so, diesel car sales rank third after petrol (takes up around 50% of the market) as well as CNG/LPG, which now accounts for around 20% of total cars sold.
CS Vigneshwar, president of the Federation of Automobile Dealers Associations (FADA), informs that sales of hybrid, CNG/LPG and EVs are now around 30% of the total sales.
“More and more customers are expecting such alternative fuel vehicles and more and more OEMs are also responding right now. Whether it is hybrids, EVs, whether it is LPG or CNG, more and more manufacturers are coming into this. And I wouldn't be very surprised to see in the next few years, this combined pie going past 50%,” said Vigneshwar.
Most of these ‘shifting’ sales will eat into diesel-based cars. While a few larger SUVs were historically run on diesel, stricter emission norms, as well as climate change factors, as well as the fear of a possible diesel ban in the future, have influenced buyer choices.
Earlier, smaller cars too had a fair number of diesel versions, but now both hatchbacks as well as SUVs have more petrol models now.
“A lot of diesel models existed in small cars or the hatchback segment. The sales of such cars have tapered down and the market is shifting to SUVs, which are run on diesel,” said Sharif Qamar, associate director of The Energy and Resources Institute (TERI).
Taxis or commercial PVs are also run on CNG, due to the cost benefits they offer, which is another area that’s eating into diesel sales. A wide variety of fuels are benefiting from the diesel shift.
“Consumer preferences have shifted toward alternatives — petrol vehicles for lower upfront cost, CNG for reduced running expenses, and EVs for both operational savings and environmental benefits,” Mishra said.
Experts believe that the importance of EVs in reducing demand for diesel is overrated as of now. In spite of extremely high growth numbers on a low base, EVs only account for around 3.5% of the total sales of PVs.
EVs, however, are dominating the three-wheeler market, accounting for around 63% of total sales in April. In fact, here too diesel-based autos come in third, after CNG, which accounts for around 26%. CNG filling stations have grown 7x between FY16 and FY25, as per Praxis.
Even as a few state governments have been cracking down on illegally run e-rickshaws, the beloved three-wheeler is where a market shift is happening. But this isn’t denting diesel sales.
Most autorickshaws, especially in the urban areas, are run on CNG. So this shift isn’t taking too much away from diesel either.
Trucks, Buses – Long Way To Go
Across segments, ‘other fuels’ are making a chink in diesel sales. Railways expanded their electrification, and solar is starting to make a mark in agriculture. Even power genset usage is reducing as the grid power supply has improved over the years. But in the long haul transport segment which includes trucks and buses, diesel still rules. In fact, both these segments account for around 38% of total diesel sales.
Even as most metro cities have shifted to e-buses, a large chunk of inter-city buses that run in and around towns and rural areas are still run on diesel. “A large number of long haul buses are run by private players, even if government transport shifts to EVs, unless they make the shift it will not happen. I do not see it happening for a long time,” says the academic expert.
The reason is not just the lack of charging infrastructure either. The country has around 96,000 petrol pumps and around 30,000 of them also have charging stations. But the deterrent here is cost.
As per industry experts, the initial cost of the shift is as high as Rs 10-15 lakh for buses, while it is around Rs 2-3 lakh for cars. Buses which run long distances, like hundreds of kilometres at a stretch, will require frequent charging, which is time-consuming. Batteries too could add to the weight of a vehicle.
Trucks have similar problems — it won’t make commercial sense to shift away from diesel, even to LNG, even as Indian Oil has opened one such chilled LNG outlet in Tamil Nadu.
CNG, too, isn’t the right fuel as the stock would be short and would require frequent refuelling. For a long time now, trucks and buses will be dependent mostly on diesel.
A few e-commerce players have announced their plans to shift their light commercial vehicles (LCVs) to other cleaner fuels. They’re yet to make a significant dent on the fuel mix with EV penetration in LCVs only at 1% in FY25. Until hydrogen as a fuel changes the game, diesel will remain the king of these sectors – and will remain relevant for a long time.
Diesel keeps the economy running, and might continue to do so for a long time now. While a few alternatives are chipping away ‘some’ of its utilities, green and clean fuels have a long way to go before it makes a structural shift. Yet, in the wake of global tensions as well as consumption worries, diesel growth might waver in the short-term, even as its long term utility remains unquestioned at least for the next 6-7 years.
