How will things change after the Euro VI norms?

BS VI Norms Euro VI Norms

Media has been covering the implementation of the Euro VI norms with a great degree of enthusiasm, dramatically alerting people that they will have to pay more for the same cars from 2020. That is a great attempt to paint the entire development in negative shades.

The reality, as it usually tends to be, is more complex than that. Bharat VI norms are identical to the global benchmark of the Euro VI norms. Several global agencies and civic groups had been complaining consistently about the rising pollution levels in India. Finally, the Indian authorities took the matter in their own hands.

How did we reach here with the Euro VI/BS VI norms?

India was lagging in its policy implementation against sulphur emitting vehicles. The last standardized set of rules that were implemented were the BS IV norms. What happened to BS V?

Earlier, the government had planned to implement the BS V norms by 2020 and the BS VI norms by 2024. That said, the alarming rates of pollution in Delhi NCR and several other cities made the government expedite the entire exercise and hence, the authorities decided to skip the BS V norms altogether. The major difference between the BS IV and BS VI norms is that the latter is tighter around the sulphur emission levels.

What does this imply for the car buyer?

Before jumping on that wagon, imagine running a manufacturing plant or a dealership at the scale of a Mahindra & Mahindra or a Suzuki or a Toyota and being told that majority of your products will be illegal in a little over a year. What will be your kneejerk reaction? You will lobby and try to bring down the tight deadlines. Initially, the government was ready to give a grace period of about three months after the April 2020 deadline, to let the vehicle manufacturers and dealers clear their stocks of BS IV vehicles. This was the plan, until the Supreme Court came with the decisive hard deadline of April 2020, with no grace periods for the manufacturers or the dealers.

As per industry experts and car reviews providers, the automakers will have to finish up selling their stocks of BS IV engines and start production of BS VI engines by as early as February 2020, in order to meet the deadline. Hence, the pressure is mounting on the manufacturers and the dealers to clear their BS IV compliant engine stocks. Now, this is a multidimensional situation for you, if you are planning to buy car in India:

1. The Car On-Road Price

Upgrading the engines to BS VI would mean that the engine manufacturers will have to incur short term costs. Collectively, majority BS IV manufacturers have decided to abandon the diesel engines as such and focus only on the petrol engine upgradation. This is because the cost of upgrading a diesel engine to make it BS VI compliant can land anywhere between ₹75,000 – ₹150,000 as per industry experts. Now, you would not be comfortable paying 20%-30% extra for a car with the exact same car specification. Hence, for the popular models like the Baleno, Swift Dzire and the cohort – you will not be seeing BS VI compliant diesel variants anytime soon.

On the other side – the petrol engine upgradation costs will go up by ₹20,000 at the least. Automakers have already indicated that they will be passing on these charges to the customers as they go ahead with any new car launch.

2. The Infrastructure

Here is the issue – you can regulate the engine makers easily. But the real distribution issue arises when the fuel makers and suppliers have to be made compliant to the new norms. There would be no point in selling BS VI engines, if the compliant fuel is not available in the market. Remember the part where the government skipped BS V altogether? This is where it brings complexities. The sulphur levels permitted under BS VI are considerably low. Hence, one can expect the short-term prices for fuels under this category to be somewhat higher.

3. BS IV Owners

You might be sensing some pressure on yourself, thanks to the policy changes. In reality, there is not much for you to worry about. The policy changes are applicable to the car manufacturers and their dealers and will not touch the cars already on the road or in the market.

As far as the original equipment, servicing and other related matters are concerned – the market already has enough inventory for these. Besides, it will take the market at least a few years to completely accommodate the technologically changed cars. Hence, you can sit back and relax because your car will be serviceable and you will have spare parts available for your car.

Does this mean that economic diesel engines will not be found on Indian roads anymore?

Not really. Several automakers have hinted that diesel variants in the higher end cars would be available, since the market for those cars will not be sensitive to a less than 10% increase in new car prices in India to make the engines compliant. So, if you compare cars, you will find that the SUVs and the premium sedans will keep running on diesel engines in the long run.

For the smaller, entry level, new cars in India – we all will have to wait for some innovative mechanism that helps us distribute the weight of increased costs more efficiently. Thus, if you are planning to buy a new diesel car, the right time is – now; because car dealers and manufacturers are under a great deal of pressure to ensure they have cleared their inventories before the deadlines come into action. We expect heavy discounts from manufacturers and dealers on the current stock, which would make car buying more attractive for you, in the near term, before April 2020.

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