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Auto makers edgy as war on air pollution kicks off in Delhi

First came the Delhi government’s directive on the odd-even number regulation, which allows plying of private vehicles with only even numbered plates on certain days of the week and odd numbered on the others. A couple of days later, the National Green Tribunal (NGT) threw its weight behind war against air pollution by directing the centre and state government to immediately cease buying of any diesel vehicles for office use.

The Supreme Court (SC) jumped in shortly by imposing a blanket ban on registration of new diesel vehicles engine capacity of over 2000 cc in Delhi till March 31, 2016. Even taxis have been directed to shift to cleaner fuel.

The directives have sent the auto industry, car dealers and prospective buyers into a tizzy. Vehicle makers claim they are being unfairly blamed as the biggest cause of air pollution. Particularly, since the industry has been adhering to the Bharat Stage emission norms implemented regularly and some environmental reports by Indian Institute of Technology (IIT) suggest that vehicles are not the highest source of pollutants.

Industry body SIAM feels a better solution would have been to stop older vehicles from plying than barring new registrations. The abrupt implementation of such directives is detrimental to the industry, feels SIAM.

Auto dealers, the biggest victims of this directive are clueless on the way forward. They are stuck with huge inventories of diesel vehicles and redirecting the sales to other smaller markets would be financially unviable due to logistic constraints and price reduction hit that would be needed to sell there.

Pawan Goenka, Executive Director of Mahindra and Mahindra stated that while Delhi’s’ air quality had worsened and that the government needed to take immediate steps to rectify the situation, he was unhappy about the arbitrary manner in which the decision was taken. “Delhi residents, auto companies and dealers will have to endure some pain”, he said, adding the IIT report on pollution needs to be released in public and studied.

However, Sunita Narain of Centre for Science and Environment counters all the allegations stating that placing the spotlight on the auto industry is not without reason. “Diesel vehicles emit seven times more particulate matter (PM) than the petrol versions”, she states, adding that the industry is well aware that even if its BS iV compliant, a diesel vehicle is far too worse than a petrol variant.

While stock analysts are busy assessing the impact of these directives, M&M which was expected to be the worst hit due to 98 percent of its products being diesel-based, has already moved the next step and launched its first petrol SUV.

This hints at a possibility that manufacturers will now start considering the various alternates available. The government’s initiatives in providing incentives for manufacture of electric vehicles might also see good response.

 “Our new SUV, KUV 100 will meet the sub-2000cc threshold laid out by SC”, Goenka said at the launch, adding that current situation has actually created an opportunity for the company to scale up its electric portfolio. He also seemed hopeful that the government will work towards creating availability of other cleaner bio-diesel fuels that are less polluting.

Industry watchers feel the SC ruling will make prospective car buyers wary of buying diesel cars as there could be similar bans in other states as well in future.

Broking firm JM Financial feels the Delhi ruling will have negative as well as positive implications.

“While we see a limited impact of this ban in near term, over a medium-long term, heightened concerns on pollution will lead to a) increasing cost as manufacturers invest more on developing and implementing fuel efficient power plants/technologies (driven by changing consumer preferences and regulatory changes), b) greater effort in diversifying the engine range to work with alternate fuels (for Mahindra, introduction of gasoline/CNG models), and c) greater thrust on development of smaller, highly efficient engines using super chargers and turbo chargers”, says a note by JM Financial to clients.

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