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India's automakers gear up for fresh round of price hikes as stricter emission norms loom

India's automakers gear up for fresh round of price hikes as stricter emission norms loom

With the roll-out of Phase II of the BS VI norms soon, automakers are looking at another round of price hikes

With the roll-out of Phase II of the BS VI norms soon, automakers are looking at another round of price hikes With the roll-out of Phase II of the BS VI norms soon, automakers are looking at another round of price hikes

The face of the auto industry changed when the BS VI norms first kicked in, in April 2020. As the industry upgraded to the stricter emission norms, consumers saw a steep rise in prices across segments. The second phase of the norms, called real driving emission (RDE), are all set to come into effect from April 1, 2023. It will require all new vehicles to meet the emission targets as per the modified Indian drive cycle standards in real-world conditions and in a laboratory environment. A segment of the auto industry that will be particularly affected is carmakers as they will have to upgrade their engines, and that will entail additional costs. As a result, many of them are mulling to discontinue certain models.

Experts say that diesel vehicles will be impacted the most as they will have to shift to the more expensive SCR (selective catalytic reduction) method of emissions control, instead of the simpler and more cost-effective LNT (lean NOx trap) system currently in use.

“To quantify the full effect of the new norms at this point is slightly complicated. Definitely, it will require some additional costs,” says Aditya Welekar, Research Analyst at Axis Securities. For most of the manufacturers, the lower-end diesel vehicles are near the end of their product life cycle, he explains. “These companies think setting up new infrastructure and bearing the cost is not justified. The cost of vehicle acquisition is also going to increase,” he says, adding that these emission norms are pushing the carmakers towards hybrid and electric vehicles (EV). “It is indirectly an incentive for them. Diesel powertrains will not be as popular as before. They will be more prominent in the higher SUV segment. Maybe hybrid will be the new diesel,” he adds. Experts say that prices of vehicles are expected to increase by at least Rs 15,000-20,000.

Per M.R. Singhania, President of Federation of Automobile Dealers Associations, EVs are expected to push the growth for the industry going forward. “The government is serious about EV adoption, and we will see carmakers moving towards EVs soon,” he says.

@PLidhoo

Published on: Jan 20, 2023, 2:01 PM IST
Posted by: Arnav Das Sharma, Jan 20, 2023, 1:55 PM IST