Get ready to pay upto Rs 1 lakh more for small diesel cars after BSVI implementation

While diesel cars will undergo a major price increase petrol cars will not be affected much by BSVI implementation. Here are the reasons and more challenges that lie in the path ahead.

By: | Updated: April 28, 2017 5:18 PM
BS VI-compliant vehicles will not be able to run on BSIV fuel BS VI-compliant vehicles will not be able to run on BSIV fuel

While India continues to take pride in being the fastest country to progress in emission norms, there are numerous challenges that the path ahead is filled with. The Government's decision to skip BSV and jump to BSVI by 2020 is undoubtedly going to put a significant amount of pressure on some OEMs and their supply chain over the next few years. Vehicle prices too will rise significantly as new and expensive technologies will be required to curtail emissions.

Speaking at the announcement of Maruti Suzuki's financial results, RC Bhargava, Chairman, Maruti Suzuki, said that small diesel hatchbacks and compact sedans will bear the maximum brunt of price increment arising out of BSVI compliance as their cost could go up by as much as Rs 1 lakh. Petrol cars though will not be affected much and might only see a price increment of around Rs 7,000 by 2020, he added.

RC Bhargava's statement puts a big question mark on the existence of such cars once BSVI is implemented. A Maruti Suzuki Swift today costs Rs 5.97 lakh for the base diesel variant presently, while the top variant costs Rs 7.44 lakh, both prices being ex-showroom, Delhi. At these prices, the Swift diesel is already more than Rs 1 lakh costlier than its similar petrol variants. Adding another one lakh to the total would simply blow the value-for-money quotient out of the park.

Small diesel cars will then cost as much as cars from the next segment. One of the key reasons for this huge price increase being limited to small cars is the fact that larger cars in most cases already have more advanced technology in their engines. In addition technologies such as Diesel Particulate Filter (DPF) or Selective Catalytic Reduction (SCR) are designed to work with larger engines in terms of displacement and hence have already achieved economies of scale. Similar systems will need to be developed from scratch and will need time to achieve volumes and hence will cost more. The future then for small diesel cars in doesn't look too bright after the implementation of BSVI emission norms.

This, however, isn't the only problem regarding the BSVI implementation. RC Bhargava didn't seem concerned about the ability of vehicle makers to meet BSVI but he hoped that BSVI fuel is available across the country by the time the norm is implemented. In case the same doesn't happen, the industry could face a big problem since BS VI-compliant vehicles will not be able to run on BS IV fuel and such a situation could cause a huge amount of confusion. It'll hence be interesting to see how the Government, petroleum industry and the automotive industry align their work processes in order to achieve a wholesome and effective implementation of BSVI emission norms.

RC Bhargava also mentioned some growth plans for Maruti Suzuki as the company that commands almost half of the country's vehicle market with sales of 1.56 million vehicles in 2016-17, now plans to increase its sales to 3 million. While Maruti Suzuki hasn't officially disclosed any timeline for achieving this target, RC Bhargava hopes it to happen in under 10 years from now.

Also Read: Maruti Suzuki shares gain post Q4 earnings; should you buy?

Speaking about the company's new plant in Gujarat, he said that the plant made around 10,000 cars between January, 2017 and March. However, in the month of May alone, the plant will manufacture 10,000 cars, allowing the company to cut down on the waiting period for its popular models and making space for new models.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.