Ethanol blending norm compliance may not be a major challenge for auto OEMs: Icra
2 min read . Updated: 07 Feb 2023, 04:22 PM IST
PremiumLower emissions in CNG vehicles will also help OEMs comply with the impending corporate average fuel economy norms
New Delhi: As the Indian automobile industry witnesses major technological transitions with respect to emissions and safety, a study by ratings agency Icra suggests that auto OEMs are unlikely to face major challenges to comply with proposed ethanol blending norms.
“Petrol remains a fuel of choice in the domestic passenger vehicle market. CNG vehicles have also gained prominence in recent years, aided by favourable running costs, improving penetration of CNG dispensing stations across the country, and enhanced product offerings by original equipment manufacturers (OEMs)," the study added.
Lower emissions in CNG vehicles will also help OEMs comply with the impending corporate average fuel economy (CAFE) norms.
“We expect the proportion of CNG, EVs, and hybrid vehicles to increase to 20-30% of new vehicle sales in the next five years. However, petrol-based vehicles will likely account for a significant portion of new PV sales over the medium term," said Shamsher Dewan, senior vice president and group head, Icra Limited.
Dewan added that it is important to reduce emissions from petrol-based vehicles to meet the CAFE norms and start the trajectory towards achieving carbon neutrality over the medium-to-long-term, besides promotion through the adoption of alternative powertrains, including EVs and hybrids.
Ethanol blending in petrol has been gradually increasing in the last several years, and India achieved 10% ethanol blending in 2022. Further, the Government of India has advanced its target for E20 implementation to 2025 from 2030 earlier.
“ICRA believes that the readiness of the auto industry and the OEMs to meet E20 blending norms is unlikely to be a major challenge. No major design changes are required from a vehicle standpoint except material recalibration, and the impact on the vehicle cost is expected to be less than 1% in the case of passenger vehicles and about 2-3% in the case of two-wheelers," Dewan said.
He added that while no major capex is envisaged, changes in engine designs and after-treatment systems apart from the material selection will be key to meeting the norms. “Loss of fuel efficiency is expected as vehicles transition from the E10 to E20 compliant design, and this would increase the total cost of ownership (TCO). However, OEMs are looking at technological improvements like light-weighting to offset the impact. Operating E10-compliant vehicles with E20 fuel would result in corrosion of certain engine components, and there would be requirements to replace the corroded parts during the vehicle lifecycle."
The ratings agency said that making adequate ethanol available pan India and addressing portability challenges will be imperative, given that ethanol production is currently concentrated in select states such as Uttar Pradesh, Karnataka, and Maharashtra, owing to feedstock availability.
The government has provided faster environmental clearances and financial assistance in the form of interest subvention to facilitate capacity addition and ensure adequate ethanol availability for a seamless transition.
“Some states have also announced state-level incentives to encourage investments. Tripartite agreements are being signed between OMCs, project proponents, and banks to ensure that payments from OMCs are utilized for timely debt servicing. A cohesive approach from all stakeholders will facilitate the E20 transition within the targeted timelines," Icra added.
