Stricter emission rules will hurt car sales: Bhargava
India's biggest automaker has warned that strict European-style emissions rules due to start next year will force up car prices, dealing another blow to an industry that was in a slump even before the pandemic hit.
"Demand will fall further, and instead of any growth there will be a decline in the industry," Maruti Suzuki India Ltd chairman R.C. Bhargava said in an interview. "The industry view is that it's already suffering a decline because of Covid, and on top of that we add further to the cost of vehicles because of new regulations."
Automakers last week urged the government to defer tougher emissions standards, which are due to be implemented in two stages in April 2022 and then in 2023. The changes will require carmakers to cut emissions about 13 per cent to 113 grams a kilometre.
The emissions curbs are critical for India's push to tackle some of the world's worst air pollution, which
costs the country 8.5 per cent of its gross domestic product, according to the World Bank. By 2025, India will have up to 20 million old vehicles nearing the end of their lives, causing huge environmental damage, according to the Centre for Science and Environment.
However, the changes come at a tough time for the auto industry, which was just beginning to recover from its worst-ever slowdown before the Covid outbreak again dented demand. Passenger vehicle sales fell 2 per cent and overall production dipped 14 per cent in the year ended March 2021, according to the Society of India Automobile Manufacturers.
Automakers are also grappling with a semiconductor shortage and higher raw material costs as commodity prices surge. Any increase in car prices could deter India's pricesensitive drivers. Just 5 per cent of cars sold are priced above Rs 15 lakh
($20,000). The nation's per capita income of only
$2,000 a year puts cleaner, but more expensive, electric cars beyond the reach of most consumers, Bhargava said.
It will be difficult for automakers to pour resources into the new technology considering the industry invested as much as Rs 90,000 crore to transition to current emission standards, which set out a 68 per cent reduction in nitrous oxide gases.
Maruti doesn't make any electric vehicles because of their cost and the country's sparse charging infrastructure. Hybrid models, improved technology for cars running on compressed natural gas and more efficient petrol cars will be enough for Maruti to meet the new requirements, Bhargava said.