Will Diesels Revive in 2026?

In 2025, the regulation of older diesel and petrol vehicles in Delhi-NCR became one of the most talked-about issues in India’s automotive and environmental policy space. For years, an age-based restriction had barred diesel cars older than 10 years and petrol cars older than 15 years from plying in the region to improve air quality. 

In August 2025, the Supreme Court of India offered temporary relief to owners of these older vehicles, prompting widespread discussion about policy, enforcement and the future of combustion engines in India’s largest urban mobility market. 

A bench of the Supreme Court led by Chief Justice B R Gavai directed that no coercive action should be taken against owners of diesel vehicles older than 10 years and petrol vehicles older than 15 years in Delhi-NCR, at least until it reconsidered the 2018 order upholding those age limits. 

The bench also issued notices to both the Commission for Air Quality Management (CAQM) and the Central Government, signalling that this long-standing rule would be re-examined in depth.

Importantly, in December 2025, the Supreme Court clarified that this protection from coercive action would now only apply to vehicles that meet BS-IV or newer emission standards, excluding older lower-standard vehicles which are claimed to pollute quite a bit more. 

However, this is not a permanent policy change. Enforcement agencies and courts will continue to refine the policy based on technical evidence, emission tests and the broader legal framework governing air quality in NCR.

What It Meant for Diesel Cars

Diesel PV sales were down ~9% YoY in August 2025, aligning with overall PV declines due to inventory adjustments. 

Post-relief, festive demand in September-October 2025 boosted PV sales by 4-17% YoY, with diesel-heavy segments like midsize SUVs seeing stronger growth (e.g., October hit record 4.7 lakh units total PV). Diesel share stabilised at ~18% nationally, with a slight uptick from H1 2024's 17.6%.

In NCR, the relief likely prevented a sharper drop in diesel registrations by restoring buyer confidence. Nationally, diesel-dominant brands like Mahindra reported 25% YoY growth in July 2025, with diesel comprising 77-80% of their SUV sales throughout the year. However, broader factors like festive GST cuts and rural recovery played a larger role in the uptick than the relief alone.

Overall, diesel’s contribution to passenger car sales remained steady in the high teens but did not grow, even as the overall automotive market expanded. Experts attribute this to several factors including rising fuel costs, strong demand for petrol and CNG vehicles, and a lack of new diesel model introductions in key segments, especially among smaller passenger cars.

Despite the attention around the Supreme Court’s interim order, there is little evidence that it materially affected India’s overall diesel car sales in 2025.

The interim relief primarily postponed enforcement actions in Delhi-NCR and offered a reprieve to owners of existing older vehicles. It did not directly alter national policy on the sale of new diesel cars, nor did it change consumer perceptions of future regulatory risk. 

Market data shows that diesel’s share in passenger car sales remained flat or declined slightly, not surged, even after the court’s directive.

A senior FADA (Federation of Automobile Dealers Associations) representative, who is also a long-standing Mahindra dealer in Delhi-NCR and Rajasthan, shared with Acko Drive that despite mid-year optimism for diesel vehicles, petrol models continued to dominate the sub-compact SUV segment. Over 65% of XUV3XO sales were petrol-powered.

Meanwhile, though the XUV700 has traditionally seen higher diesel demand, the Supreme Court’s interim relief on diesel vehicles earlier this year failed to boost its diesel sales share any further.

Broader Industry and Market Trends in 2025

At the same time that these legal developments were unfolding in Delhi-NCR, the Indian automotive market was also witnessing notable changes in buyer preferences and fuel mix trends.

In the fiscal year 2024-25 (April 2024 to March 2025), petrol cars continued to dominate passenger vehicle sales in India, accounting for roughly 57.5% of the total, while CNG vehicles grew sharply to about 19.4% of the segment. Diesel cars made up roughly 18%, and pure electric vehicles accounted for a smaller share in the market. 

Interestingly, 2025 was a landmark year where CNG not only matched but surpassed diesel in passenger vehicle sales volume and share, reflecting a broader transition toward gaseous fuels amid rising fuel prices and sustainability focus. 

By the end of 2025, diesel cars in India remained relevant mainly in larger SUVs due to fuel economy concerns associated with heavy petrol vehicles. But, in compact cars, diesel’s appeal continued to erode. 

Is Diesel’s Future Bright?

Given that none of the key industry indicators show a reversal in diesel sales trends following the court order, it is clear that market forces and consumer preferences have played a larger role than regulatory relief in shaping 2025 outcomes.

Going into 2026, manufacturers are expected to further prioritise petrol, CNG, hybrid and electric options, while diesel is likely to become increasingly niche, catering mainly to specific segments and use cases rather than the mainstream passenger car market.

Also read: Upcoming Car Launches In January 2026 To Watch Out For