Strict emissions rules will hit car sales: RC Bhargava
MUMBAI: The country’s biggest carmaker 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 RC 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% to 113 grams a kilometer.
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% 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 to recover from its worst-ever slowdown before the
Covid outbreak again dented demand. Passenger vehicle sales fell 2% and overall production declined 14% in the year ended March 2021, according to the latest figures from the Society of India Automobile Manufacturers.
Automakers are also grappling with a semiconductor shortage and higher raw material costs as commodity prices surge. Mahindra & Mahindra Ltd., which makes sports utility vehicles, will increase prices if commodity prices climb further, chief executive officer Anish Shah said in an interview with Bloomberg.
Any increase in car prices could deter India’s pricesensitive drivers. Just 5% of cars sold are priced above ₹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.