The BS-VI emission norms, which come into effect from April 2020, are likely to adversely affect auto sales as there will be another round of price rise, thereby impacting volume growth in the near term, Maruti Suzuki chairman RC Bhargava said. In an interview with FE, Bhargava said in the last one year, car prices have gone up significantly on account of the safety norms and other regulations, which has increased the acquisition cost for customers. “The prices have already gone up for many cars which have been launched with the upgraded engines. Others will launch soon with higher price tags and that will sure lead to a slowdown for a longer period of time,” he said.
The new emission standards will come into effect from April 1, 2020, as part of efforts to reduce vehicular pollution. When updated, the engines limit the release of air pollutants such as nitrogen oxide and carbon monoxide. But the prices will go up, given that manufacturers invest a lot in upgrading the engines.
Bhargava, however, feels there was no need for cars to move to the new standards as pollution caused by them is less than 2% of the total pollution in the country. “BS-VI is going to give you lower emissions but if the emission from cars is just about 1% in the vast part of the country, is it really important to reduce it further?” he asked.
Quoting a study by The Energy and Resources Institute (TERI), he said pollution from cars even in New Delhi is just 3.4%, and even if BS-VI norms bring it down to 2.4% or lesser, no one will feel the difference in the air quality.
Initial estimates suggest while petrol car prices will go up by anywhere between `20,000 and `60,000 — depending on the engine capacity — diesel cars would be costlier in the range of `1 lakh-`2 lakh on account of the new emission norms. This is over an above the around 15% rise in prices since September 2018 when three-year third party insurance became compulsory and thereafter new safety norms mandated fitting of certain safety equipments.
Bhargava says rollout of the new safety norms was not required as the rise in prices on account of that was not in sync with the income levels of the people. “The Supreme Court and the ministries have got this decision in their mind that India must match the safety and emission standards of the world. You can have them, but there will be a consequence because your incomes are nowhere near the world standards. Cars in India will become as costly as cars abroad and then the result is a slowdown,” he said.
Passenger vehicle sales have been falling since the second half of 2018, impacted by a rise in prices and costlier finance options. Led by highest-ever discount during the festive period, volumes grew marginally in October 2019.
Bhargava further said the impact of new emission norms will be less on Maruti Suzuki as around 75% models are already BS-VI compliant. “For Maruti, gradually there will be growth seen and if not growth, the impact of BS-VI norms will be lesser compared with other manufacturers. Others will have a problem because sales will be impacted once they launch the upgraded models with higher prices,” he said.