Tata Motors is reducing the size of its diesel engines to skirt a temporary ban on the sale of large diesel-powered cars in New Delhi as the government seeks to reduce toxic smog in the capital city.
The Delhi government ban on the sale of cars with diesel engine capacity higher than 2 litres was imposed in December and has hurt carmakers such as Tata Motors, Mahindra & Mahindra and Toyota Motor Corp.
The ban, initially imposed until March 31, has been extended by the Supreme Court, which has also indicated that it could levy an additional tax on the sale of diesel cars. The next hearing is later this month.
A lack of clarity on when the ban might be lifted and carmakers' fears that it could be a precursor to a nationwide ban has prompted companies to consider ways around the ban.
Tata is re-engineering its existing engines to bring them below 2 litres, Girish Wagh, senior vice president of programme planning and project management at the company's passenger vehicle operation, said on Wednesday.
Wagh did not say how much the move would cost the company or a date when it expects to introduce the new engines.
"A completely new engine takes almost or more than a year to come, but since this is something more innovative ... this will be done much faster," Wagh said.
The re-engineered engines are only for Tata vehicles and not those made by its luxury carmaker Jaguar Land Rover.
Mahindra & Mahindra in January launched 1.99 litre diesel engines to counter the ban and is working on developing petrol engines for most of its vehicles.
Earlier on Wednesday Tata Motors, top automaker by revenue, launched its Tiago hatchback. The car was originally slated to be called the Zica, short for Zippy Car, but was renamed after the outbreak of the similar-sounding Zika virus.
The car's starting price of Rs 320,000 ($4,800) undercuts similar vehicles by rivals such as Maruti Suzuki India and Hyundai Motor and is equipped with features such as an touchscreen infotainment system and rear parking sensors in an effort to revive sluggish domestic sales.
Tata's passenger vehicle sales for the year to March 31 grew by 2 per cent, compared with 11 per cent growth for market leader Maruti.
Shares in Tata Motors closed 1.7 per cent higher on Wednesday in a flat Mumbai market.