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Diesel cars to see a price increase

Proposed BS-VI Emission Norms would align India to European Standards by 2020. The proposed emission standards will lead to increase in prices of not just cars and SUVs, but also two wheelers. However, diesel passenger vehicles (PVs) will see significant increase in prices.

The proposed BS-VI emission standards that will come into force by April 2020 will push vehicle prices upwards with diesel segment likely to witness sizeable cost increases due to introduction of additional components, it said. Since the cost implications will be higher in making the diesel cars BS-VI compliant, the price of diesel passenger vehicle (PV) is likely to increase by Rs.75,000-Rs.100,000 per vehicle, while the increase for petrol PVs could be in the range of Rs.20,000-30,000 per vehicle.

As diesel vehicles will undergo significant technology changes, the cost differential between petrol and diesel PVs may also expand further. The price gap between the diesel and petrol vehicle is expected to increase from Rs.1 lakh to Rs.1.5 lakh.

With widening payback period for diesel vehicles, there will be a big impact on demand for diesel models, which are already on a declining trend since FY 2015 due to narrowing price gap between the two fuels and recent ban on registration of diesel vehicles (with engine capacity of 2000cc and above) in the National Capital Region (NCR). It is estimated that payback period will increase to 75,000 km for mid-size cars.

With proposed BS-VI emission standards being incrementally more stringent for diesel vehicles vis-à-vis petrol vehicles, the technology for former is likely to undergo significant upgradation both within the engine as well as the exhaust system.

For instance, the sharp reduction in NOx levels can be achieved through introduction of new technologies such as Lean NOx Trap (LNT) (for diesel PVs). In addition, Diesel Particulate Filters (DPFs) have emerged as the most common solution to control PM emissions for diesel PVs and M&HCVs, globally. Given the fact that diesel segment will see addition of new components, OEMs will also be required to modify their designs to accommodate additional components like urea tank in case of HCVs using SCR technology.

These factors, along with potential risk of restricting diesel-powered taxis could have significant implications on OEMs’ investments in the diesel space. More importantly, OEMs with higher dependence on diesel models (especially in the Utility Vehicle segment) would look at reducing their exposure and accelerate investments in the petrol segment.

Government has proposed that even two wheelers will have to move to BS-VI by April 2020 from the present

BS-III emission norms.


EFI system will increase cost of two-wheelers

“While there won’t be significant changes in engine or after treatment systems to meet BS-IV norms, for BS-VI standards, the industry will have to adopt Electronic Fuel Injection (EFI) system and also tweak the ex haust system. Collectively, these changes will increase cost of two- wheelers by approximately Rs.5000-6000 (or 10 per cent for mid-size motorcycle),” said Subrata Ray, senior group VP, ICRA ratings.

In February 2016, the Government of India announced that the country would directly move to more stringent BS-VI norms by April 2020, four years ahead of the earlier schedule.

Meanwhile, timely execution and availability of requisite standard of fuel are seen as key challenges rather than technology for the auto industry.

“We believe availability of technology to meet proposed BS-VI emission standards is unlikely to be a challenge for OEMs as a) most of them export vehicles to developed markets like Europe, which follow stricter emission standards and b) also have access to global component manufacturers that develop these technologies. Additionally, most of global component suppliers have R&D base as well as manufacturing units in India with fair understanding of the Indian market, said Ray.

 “But, the key challenge for OEMs and their suppliers would be in adapting these technologies for Indian driving and weather conditions and making them cost-effective in a relatively short-time frame,” he added.

 Given the past experience with respect to delays in availability of BS-IV compliant fuel, availability of cleaner fuel by 2020 on nationwide basis may also become a bottleneck.

 The migration to BS6 would also alter the petrol-diesel mix in the four wheeler industry. OEMs with higher dependence on diesel models may accelerate their focus on petrol segment, while hybrids and other clean technologies would take centre stage in their R&D plans.

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