The jump in prices will be bigger for diesel cars: They could cost Rs 1 lakh-Rs 2.5 lakh more.
By Pritish Raj & Arun Nayal
Cars and Utility vehicles are tipped to become costlier by 10-25% over the course of next year as they become BS VI-compliant. The jump in prices will be bigger for diesel cars given the higher cost of upgradation. Depending on the engine capacity, the cost of diesel cars could be significantly higher by anywhere between Rs 1 lakh and Rs 2.5 lakh. Initial estimates show customers will need to pay somewhere around Rs 25,000-60,000 more for petrol cars.
Pawan Goenka, managing director, Mahindra and Mahindra, said the conversion from BS IV to BS VI would result in a price increase of about 10%. “Accordingly, a car priced at Rs 10,00,000 will see an increase of Rs 1 lakh,” Goenka said. Regulatory changes — from April 2020, all cars must meet BS VI norms on emission — require all engines to be overhauled.Rajesh Goel, senior VP & director, sales and marketing, Honda Cars India, is expecting a substantial rise in prices. “Since there would be a complete technological transformation, prices are bound to increase significantly,” Goel told FE.
Sales of smaller diesel cars could be badly impacted because the increase in prices could be as much as Rs 50,000-1,50,000 on a base price of around Rs 6 lakh. Currently, around 1.8 million small cars are sold annually. Gaurav Vangaal, senior analyst, automotive forecasting, IHS Markit, believes it may not be cost-effective for the manufacturer to make small diesel cars. “The number of diesel options for the slightly bigger cars such as the Swift, Baleno and i10 or those in the B-segment too will reduce drastically,” Vangaal said.
For instance, the BS VI petrol version of Maruti Suzuki’s Baleno, priced at Rs 5.40 lakh (ex-showroom), will cost around Rs 6 lakh. The price of the diesel Baleno, will go up from around Rs 6.51 lakh (ex-showroom) to around Rs 7.50 lakh. Already, with diesel cars costing more than petrol variants, their share has fallen to around 35% in 2018 from 40% in 2016.
Crisil estimates that capital expenditure by the domestic automotive components companies is expected to remain high at around Rs 24,000 crore over FY19 and FY20, to meet tightening regulations, research and development requirements, and capacity expansion.
The ratings agency said new regulations include transitioning to Bharat Stage VI (BS VI) fuel norms by April 2020, increase in truck axle loads, suspension equipment for two-wheelers above 125 cc, air-conditioned cabins for trucks and crash tests. It believes there will be a last-minute rush across segments to beat the BS VI transition deadline.