Hit by SC diesel car ban, carmakers in India see an uncertain future

The Supreme Court’s order to ban registrations of diesel SUVs and cars with engines over 2000cc in Delhi and NCR till March 31, 2016 has seen strong reactions from the auto industry with most automakers and dealers disappointed over the verdict.

The ban would seriously dent utility vehicle manufacturers like Mahindra & Mahindra, Tata Motors and Toyota Kirloskar Motor as they have a wide range of passenger diesel-engined vehicles.

It will also affect luxury carmakers like Mercedes-Benz India, which has 11 cars that fall under the purview of the ban. BMW India will have six models affected by the ban, among which is the 530d luxury sedan which sells the most in Delhi. Delhi is also one of the top two markets for all luxury carmakers after Mumbai.

It goes without saying that Mercedes-Benz India, which has 10 dealerships in NCR, is among the worst hit by the ban. Commenting on the developments, a company spokesperson said: “We think this decision is going to adversely affect the auto industry as a whole and will certainly encourage the creation of an unequal ground. This ban on diesel engines also creates an environment of uncertainty and will severely impact our expansion plans and future investments put in place for the Indian market. We also have to consider the loss of jobs that this will result at the dealerships, at the vendors producing diesel engines and also negatively impacting our own workforce.”

Vikram Kirloskar, vice-chairman, Toyota Kirloskar Motor, said that despite being apprehensive of Delhi’s air quality, there should have been a different approach to maintain the same. “We are concerned about the deteriorating air quality of Delhi. We have always been at the forefront of offering advanced technologies such as hybrids and have always complied with all regulations for vehicles. Toyota’s global approach is to make vehicles that will effectively reduce pollution. There are various sources of pollution which can be measured using a scientific source apportionment study.

“To improve the air quality from a vehicle point of view, we must take a comprehensive view of various factors causing pollution. These can be categorised into infrastructure-related pollution including traffic congestion areas and contribution by the industry, usage-related pollution considering the stop-start nature of traffic, and vehicle-related compliance to various emission norms.

Based on all such factors, it would be appropriate to draw an action plan which helps improve the air quality in a sustainable manner,” said Kirloskar.

According to the company, Delhi-NCR (Delhi, Faridabad, Ghaziabad, Noida and Gurgaon) contributes around 8% of Toyota sales and diesel models contribute around 80% of Toyota's NCR Delhi sales.

Also read: All the cars affected by the diesel ban in Delhi & NCR

A Tata Motors spokesperson said that although the carmaker will surely see an impact on its sales, it hopes to recover lost ground by banking on its petrol models.

“While we will see some impact on our sales in the 3-month period specified in the order, our continued foray into the petrol segment, as shown by recent launches, will stand us in good business stead over a period of time. Tata Motors shares the concern for environment but we remain convinced it is imperative this is seen in the larger context beyond just one quarter, to ensure environment-friendly initiatives are undertaken at all levels with a holistic approach that looks at causes of pollution from all sources. As stated earlier, the long term regulatory regime should focus on the overall emissions-control roadmap rather than any specific fuel or technology,” the company spokesperson said.

Meanwhile an official statement from UV maker Mahindra & Mahindra read: “The company would hope that at the end of the interim period of March 31, 2016, the judiciary and the regulators would look at the impact of these measures and take a holistic view on improving the air quality of Delhi, taking into account the overall impact of each action. In the short term, the Honourable court’s order today, affects the sales of some of the company’s products in NCR. The vehicles affected represent about 2% of the company’s total monthly sales. The company is in the process of evaluating various options to work within the framework provided by the Honourable Supreme Court.”

However, Anand Mahindra, chairman and managing director of the Mahindra Group, is all up for the challenge as reflected by his tweets. “We thrive on challenges and rise above them. We'll surprise everyone with our resilience, just as we have done for decades. At the core of Mahindra's DNA is the unshakeable belief that 'When the going gets tough, Mahindra gets going. So even if we believe the decision on diesel vehicles isn't optimal, we'll honour it and develop vehicles that comply with their stipulations. I have always believed that the Supreme Court is an institution that sustains our faith in social justice and democracy in India,” he said.

Now that the ban is in place for a quarter, it will surely make some carmakers take a hard relook at their future products and India game-plan while also affecting the sales of those who have a number of diesel models in their stable. What’s more, a number of carmakers have invested crores of rupees in setting up diesel engine manufacturing operations. It now remains to be seen how much of an impact a ban like this would have on Delhi’s air quality, as it is proven beyond doubt that diesel vehicles are not the only source of pollution in the region.

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