With its market share sliding to below 40% in 2012-13, India's largest car maker Maruti Suzuki has asked its parent firm to develop small diesel engines that may power some of its best-selling cars like the Alto and Wagon R.

Maruti's share slid to 39.1% in the last financial year against nearly 45% two years ago as entry of new players and a lack of diesel engines from Suzuki hampered its prospects.

We have asked Suzuki to consider building small diesel engines," said Kenichi Ayukawa, managing director and CEO, Maruti Suzuki India Ltd (MSIL). "In India, the preference for diesel cars is strong and we are traditionally stronger in petrol cars. We have to study and develop our own diesel engine."

Currently, Maruti sources its diesel engine technology from Fiat and has diesel options in its Swift and Ritz compact cars and Dzire and SX4 sedans.

"Our sales volumes have still gone up so it is not that we have been weakened. The industry has expanded as newer players have come in. We had 60-70% market share when there were not many players and the industry was small. Today there are 19 companies," Ayukawa said. "I am not content with 40%. The challenge for us is to increase that."

Demand for diesel cars peaked last year when its share in overall car sales accounted for 61% during the July-September period. Since then, however, demand has slowed down as fuel prices have begun to take a toll. In the first quarter of this financial year, the market share of diesel cars has dropped to 54%. Overall car sales have declined for eight consecutive months.

"Diesel is no longer the driver of the industry," said R C Bhargava, chairman, MSIL. "In our portfolio,diesel car sales had gone up to 38%. This year it has come down to 34%. Fortunately at the retail level we are witnessing a revival in overall demand. We are still hopeful of a growth of 4-5% for the industry this year."