Diesel engines are starting to gain traction in India as more carmakers enter the market and bring new technologies.

The Indian car market, which grew 25% to 1.9m vehicles last year, is dominated by petrol models. Three out of every four cars that the country’s largest carmaker Maruti Suzuki sells is petrol-driven.

Diesels sales have traditionally been held back by high maintenance and premium pricing but the proportion of diesel sales has been going up steadily from 15% in 2006 to 25% in 2009, thanks to improving technology and fuel efficiency.

The country’s two biggest players, Maruti Suzuki – with 54% market share – and Hyundai (18%) said they will spend more on building and marketing diesel cars to keep pace with demand while Honda and Toyota plan to develop diesel engines for their passenger cars.

Honda, which has only petrol-powered vehicles available in India, is developing a small diesel engine for the market, while Toyota is to roll out a diesel version of Corolla Altis, making it its first diesel-driven passenger car in India.

Honda Siel’s marketing chief, Jnaneswar Sen, told India’s Economic Times: “We feel the need to develop a diesel engine,” although the company is yet to decide the timeline for the launch.

Toyota said that 90% of its sales are diesels, but these are in utility vehicles and SUVs, not passenger cars.

Maruti Suzuki, Hyundai, Tata , General Motors and Ford have all stepped up production of diesel cars to cash in on increasing demand which, said the Economic Times, consumers see as more fuel efficient and environment friendly than petrol-driven cars.

Maruti Suzuki, which sells 60% of its popular Swift, Dzire and Ritz cars in diesel versions, plans to roll out smaller diesel cars, using Fiat ‘s 700cc engine.

Managing executive officer (engineering) I V Rao said: “While we will develop diesel engines, Maruti’s strength will continue to be gasoline as we make fuel efficient petrol engines.”

Now that Volkswagen has a 19.9% state in Suzuki, Maruti could source diesel engines from the German carmaker in the future.

Hyundai is considering making diesel engines in India. Sales and marketing director Arvind Saxena said: “Currently we import diesel engines. To have them in small cars it has to be cost effective.”