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Business News/ Industry / Manufacturing/  Car makers fear wider impact of Supreme Court’s diesel ban

Car makers fear wider impact of Supreme Court’s diesel ban

Even as sales decline, worries emerge over possible implications of the diesel engine ban beyond Delhi NCR

Photo: MintPremium
Photo: Mint

New Delhi: The Supreme Court’s decision to indefinitely extend its ban on the sale of large diesel-fuelled sports utility vehicles in Delhi and the national capital region (NCR) will have implications across India, car makers fear.

“I am not affected by the ban. I only have one product in the 2,000cc or above. Volume is not too great unlike other players. But tomorrow, it will affect Mumbai and other metro cities, such as Kolkata, and then it will come down from 2,000cc to may be 1,000cc or 800cc," said Y.K. Koo, managing director at Hyundai Motor India Ltd.

The Supreme Court ban— aimed at supporting measures to improve Delhi NCR’s’s air quality—has hurt companies such as Mahindra & Mahindra Ltd, Tata Motors Ltd, Toyota Kirloskar Motor Ltd, and Mercedes-Benz India Pvt. Ltd.

The court first barred the registration of diesel vehicles with engines bigger than 2,000cc in Delhi NCR on 16 December and extended the ban on 31 March until further orders.

Car makers are tweaking their products and strategies in response to the court order, as NCR accounts for 7% of India’s auto sales. This includes launching CNG, hybrid and electric cars, downsizing diesel engines, finding newer export markets for diesel vehicles and sharpening their focus on petrol models.

Koo said the ban has already hit sales and that the share of diesel-run vehicles in India’s passenger vehicle market had come down to 45% at the end of December 2015.

In the four months to April, its share has fallen further to 40%. “This is my biggest worry," Koo added.

According to a top executive at one of India’s leading car makers, the auto industry is facing the brunt of the court decision despite adhering to all the legal requirements.

“If somebody is doing things in accordance of the law, should they be punished? Companies have set their operations in India after their shareholders made investments in accordance with the government policies. Why should they be penalized? What is their crime? It is like imposing a fine on shareholders," said this executive requesting anonymity as the matter is subjudice.

“From the legal part of it, there’s a larger issue that nobody is looking at—what is my recourse?" this executive added.

Environmentalists say the dieselization of vehicles needs to be controlled.

“The court has clearly said that the ban is temporary. It is there till the environment compensation charge on diesel cars is decided by the court. The issue needs to be looked at from the perspective of controlling dieselization," said Anumita Roychowdhury, executive director of the Centre for Science and Environment, a New Delhi-based environment think tank. “We certainly want to control dieselization until India gets greener diesel, which is scheduled only in 2020 when Bharat Stage VI emission norms kick in."

While companies like Hyundai have expressed concern over the court order, others are reluctant to talk about it.

“We have been advised to not make more noise on the subject —what if the court considers it as contempt," said an executive at a luxury car company. He also requested anonymity.

Diesel is considered more polluting than petrol because being a heavier hydrocarbon, it emits more carbon toxic compounds. Diesel also emits more particulate matter than petrol. Car makers, however, do not agree.

Mint on 6 April first reported that Toyota Motor Corp., world’s largest carmaker, will halt new investments in its India operations till there is clarity on the fate of diesel-powered vehicles.

Between 2011-12 and 2013-14, auto makers such as Maruti Suzuki India Ltd, Hyundai Motor India, Honda Cars India Ltd and Ford India Pvt. Ltd invested significantly in increasing capacity to produce more diesel engines.

Maruti invested 1,700 crore on building diesel engine capacity of 150,000 units per annum at its Gurgaon plant. Maruti Suzuki has a total installed capacity of 450,000 diesel engines, of which 300,000 are manufactured at the Manesar plant.

Hyundai pumped in 1,500 crore on building a diesel engine facility at its factory near Chennai. The plant has a capacity to produce 300,000 engines a year.

Honda invested 2,500 crore to set up its first integrated diesel engine plant in India in 2014. The unit also supports its operations in Japan and the UK.

While the Supreme Court may only hear the case once its opens after summer break, there is a possibility that the auto industry may make a submission requesting that the court identify auto makers who flout the emission norms and penalize them individually instead of holding the entire industry accountable, a person directly involved in the court proceedings said.

“What else can we do? We are hoping that court will lift the ban then," said this person, requesting anonymity.

Mayank Aggarwal contributed to this story.

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Published: 18 May 2016, 02:00 AM IST
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