Improved emission norms may relegate diesel vehicles to past
Last week, the chairman of Maruti Suzuki India Ltd, India’s largest car manufacturer, announced that the company will stop manufacturing diesel vehicles from April 1, 2020. The company will instead focus on developing and scaling and compressed natural gas (CNG) variants and hybrid vehicles.
The announcement received a lot of fanfare, especially from people who are concerned with environmental degradation and public health decline. This is because Bharat Stage-VI (or BS-VI) norms reduces emission significantly as compared to BS-IV vehicles. For example, a BS-IV diesel car is allowed to emit up to 25,000 micrograms of particulate matter (PM) for every kilometre. The same vehicle under BS-VI emission norms can only emit up to 4,500 microgram per km. That is over 80% reduction in PM emission.
The BS-VI emission norm would come into force from April 1, 2020, across the country. The impact of transitioning to BS-VI will surely be positive for health and the environment. However, there is a much larger disruption that will happen due to this transition. Let me highlight three main impacts:
The primary reason why auto makers are rethinking their strategy around diesel vehicles is the cost. The transition of passenger vehicles from BS-IV to BS-VI will require investment from vehicle manufacturers, diesel vehicles will need bigger sum of investment. This will drive up the cost of a diesel car by almost ₹100,000 as against ₹20,000 for petrol vehicles.
Currently, the prices difference between diesel and petrol passenger vehicle is around ₹1,00,000, but after BS-VI norms kick in, the difference will be almost double. This will counter the fuel efficiency benefits of diesel vehicles unless the vehicle runs more than 150 kilometres per day. This is quite impractical as average daily run for a passenger car in India is less than 50 km.
In addition, the sale of diesel vehicles has been falling for the last few years. Five years back, every second car sold in India was a diesel car. Now, every fifth car sold is diesel. Therefore, falling sales coupled with increased cost of transition is forcing vehicle manufactures to rethink their diesel strategy.
The government, in March this year, launched the second phase of Faster Adoption and Manufacturing of (hybrid) and Electric Vehicles in India, also known as FAME 2. This ₹10,000-crore scheme focuses on increasing the deployment of electric vehicles in India.
As part of the scheme, the government intends to incentivize use of electric buses, three-wheelers and four-wheelers for commercial purposes. It is expected that this scheme will support 10 lakh e-two-wheelers, 5 lakh e-three-wheelers, 55,000 e-four-wheelers and 7,000 e-buses. This also has a bearing on auto manufacturers.
For example, one can say, maybe the passenger vehicles don’t run that much but what about taxis? Yes, Uber and Ola cabs run in excess of 250 km per day, but the focus to deploy 55,000 electric four-wheelers has direct impact on the taxi market because electric vehicles cost anywhere between two to three times more than conventional counterparts.
However, in terms of lifecycle costs, electric vehicles are already becoming competitive in many categories. Therefore, any financial support to overcome the initial upfront cost will only increase their share at the cost of diesel vehicles.
Diesel vehicle engines operate at a higher efficiency than petrol vehicle engines. This means that for every litre, diesel vehicles will give a greater mileage than petrol counterparts. This has largely been used as an argument for promoting diesel vehicles as clean vehicles. However, multiple studies reveal that diesel is not as clean as is suggested.
The recent study by International Council of Clean Transportation (ICCT) revealed that globally, diesel exhaust is responsible for half the transport sector-related deaths. What is even more scary is the fact that in India this share is two-thirds.
Also, particulate matter from diesel vehicles are heavy in black carbon, they trap more heat than CO2. Therefore, they have a significant impact on climate change as well.
The Diesel Emissions Scandal in US and Europe showed how a number of vehicles manufactures used devices to manipulate results of emissions tests. This meant that the vehicles will have a low-emission during testing as compared to the real-time emission when used. However, the image of diesel vehicles has taken a strong beating since the scandal broke out, and rightly so.
Maruti Suzuki is India’s largest car manufacturer with a market share of over 50%. The announcement around diesel vehicle is big, bold move, which is backed by pure economics, apart from emissions.
The company did say that it might consider bringing back, especially the 1.5-litre diesel engine. However, it looks very unlikely because, going by the trends, the future looks more likely to be around shared, connected and electric.