“Given the past experience with respect to delays in availability of BS-IV compliant fuel, the availability of cleaner fuel by 2020 on a nationwide basis may also become a bottleneck,” says a report by rating agency ICRA.
The Government of India in February decided to skip the BS-V emission standards and directly move to more stringent BS-VI norms by April 2020, four years ahead of the earlier schedule.
ICRA said that the transition may not be smooth as industry players will have numerous challenges to deal with. “We believe while availability of technology is not an issue, the key challenge for OEMs will be adapting the available solutions to Indian market conditions in a relatively short time frame, in a cost-effective manner,” says ICRA.
The report also suggested that OEMs with higher dependence on diesel models would probably accelerate their focus on petrol segment, while hybrids and other clean technologies would take centre stage in their R&D plans.
“We expect OEMs with higher dependence on diesel models (especially in the Utility Vehicle segment) to reduce their exposure on diesel and accelerate investments in the petrol segment,” said Subrata Ray, Senior Group VP, ICRA ratings. “In comparison to existing emission standards, the proposed BS-VI norms incorporate substantial tightening of NOx and Particulate Matter and also implement a limit on particle number. Further, the emission standards are incrementally far more stringent for diesel vehicles as compared to petrol variants.”
One of the reasons for the move towards petrol and other fuels could be the expected increase in price of diesel vehicles with the coming of stricter emission norms. All vehicles, including two-wheelers and commercial vehicles will have to move to BS-IV norms across the country by April 2017.
“Overall, the proposed emission standards will push vehicle prices upwards with diesel segment likely to witness sizeable cost increase due to introduction of additional components. This would make Diesel Passenger Vehicles costlier (vis-a- vis Petrol variants) and consequently may deter demand for Diesel vehicles,” said the report.