Even as demand for CNG- (compressed natural gas) powered vehicles grows in India, the CNG retrofitting business is taking a hit. Having issued a draft proposal vide a notification on January 27, 2022 to allow fitment of CNG and LPG kits in BS VI vehicles which are less than 3.5 tonnes in gross vehicle weight (GVW), the final approval and go-ahead from the Ministry of Road Transportation and Highways (MoRTH) is still pending. This is adversely impacting the aftermarket CNG retrofit business.
On April 1, 2020, the stringent BS VI emission norms came into force but more than two years later after the technological upgrade, there is still no approval for vehicles complying with these emission regulations to be fitted with the greener CNG fuel option in the aftermarket.
OEMs benefit, aftermarket holds its breath
At present, BS VI cars see CNG installation only at the factory level, of which OEMs like Maruti Suzuki India, Hyundai Motor India and more recently Tata Motors, are the only players offering petrol-CNG bi-fuel options in their select models. With demand for this more economical and efficient fuel option only growing, attributed to the sharp rise in prices of petrol and diesel in the past couple of years, it is only OEMs which have made all the gains, leaving the small-scale aftermarket operators scrambling to remain profitable.
In FY2022, CNG-powered sales clocked near-55 percent YoY growth with 265,383 units, which comprises 8.64 percent of total PV sales of 3,069,499 units vs 6.30 percent in FY2021. With an impressive 7 cars on offer with a CNG option last fiscal, India’s largest carmaker – Maruti Suzuki India – commanded an 81 percent market share. It has now intensified its CNG assault with 10 cars from its portfolio being offered with the factory fitted bi-fuel option. In fact, of its existing 387,000 units order backlog, CNG variants account for 126,000 units or 33 percent.
Most factory-fitted CNG kits/cars, including those from Maruti Suzuki’s competition, command a premium of almost Rs 100,000, making the cost-conscious buyer explore the aftermarket for a much cheaper retrofit alternative. For instance, modern-day sequential CNG kits which are approved for BS III vehicles (registered after April 1, 2006) as well as for BS IV vehicles (registered after April 1, 2010) cost between Rs 40,000-50,000 in the aftermarket.
However, with no approval for the kits to be legally endorsed on the BS VI vehicle’s registration certificate (RC) and insurance after being retrofitted, the business for CNG retrofitters has dwindled. “What used to be around 100 CNG kits a month, on an average, during the peak of the business in 2012-2013, we now hardly cross installation of 15 kits a month on BS IV and BS III cars,” says Sunil Dutt, the proprietor of Delhi-based Tara Dutt Automobiles, a CNG retrofit centre in the capital’s South Delhi area.
Dutt tells Autocar Professional that the business has been significantly impacted in the last two years due to the lack of approval for fitment of such kits on BS VI cars, and most installers are only majorly holding on to the space to handle troubleshooting of vehicles on which kits have already been installed.
New Type Approval ruling could be the death knell for CNG kit retrofitters
The aforementioned MoRTH notification has also brought along new rules for the Type Approval (TA) certification of these kits for BS VI vehicles, and this could spell the death knell for CNG kit retrofitters. Dutt explains that CNG kit manufacturers, including renowned Italian brands like Lovato and Tomasetto, are now required to get a kit approved by ICAT or ARAI, with each kit being relevant for a particular engine capacity, with a tolerance of only (+/-) 7 percent for petrol vehicles up to 1,500cc, and (+/-) 5 percent for vehicles above 1,500cc in engine capacity.
This would essentially mean that a CNG kit being sent for validation to the automotive test agencies for a Suzuki 1,197cc petrol engine on the Swift, would get certified only for cars with an engine displacement between 1,113cc (1,197 / -7 percent) and 1,281cc (1,197 / +7 percent). On the contrary, it is understood that the BS IV TA certification allowed a 25 percent margin both below as well as above the engine capacity limit, therefore, significantly expanding the scope of fitment of the same kit into multiple cars across manufacturers in a particular engine size band.
Moreover, as per the new TA guidelines, a CNG kit supplier has to now get kits validated separately for different OEMs. “This calls for multiple cars and multiple kits to be sent for homologation. Probably, one kit supplier can focus on getting validation for cars of a certain OEM, and another supplier on some other,” says Dutt. It is understood that with each Type Approval certification, which costs Rs 40-50 lakh, kit suppliers are also doing their due diligence. What’s more, the certification is valid only for three years, which makes the entire procedure a rather expensive affair.
In lieu of added safety after the modification, the new TA norms, under the AIS-098 standards, also mandate the CNG kit to undergo a frontal offset collision, however, only in case the system increases the vehicle’s kerb weight by over 8 percent.
Reducing CNG-petrol/diesel price differential another sales impediment
Other than the certification issue, there is another sales speedbreaker for the CNG retrofitment kit business. Dutt says the diminishing gap between CNG and petrol/diesel prices is becoming a huge deterrent for car users to switch to CNG, and people prefer to tank up on petrol. “Moreover, whoever wanted to switch to CNG has already installed a kit in their BS IV or lower-spec car, leaving marginal scope for fresh business,” adds a sombre Dutt.
From Rs 41.90 per kilogram in June 2013, CNG prices in the national capital remained largely stable and rose marginally to Rs 46.60 per kilogram by August 2019. However, prices have moved northwards to first cross the Rs 50 per kilogram mark in December 2021, touched Rs 66.61 in April 2022, and hit Rs 75.61 in May 2022 – up 13.5 percent within a month. Compared to December 2021, CNG prices in Delhi have registered a substantial 42.5 percent increase.
Clearly, the on-ground market reality for CNG kit retrofitters remains worrying. According to Dutt, “Modern-day sequential kits with their engine-temperature-dependent switchover mechanism to CNG after running initially on petrol, as well as the use of high-quality components and complete Italian software, offer similar levels of safety and hygiene as a factory-fitted kit, given the installation is done professionally.”
But, according to an Automotive Research Association of India (ARAI) spokesperson, “Implementation of CNG kits in a BS VI vehicle is a much more complex affair with the added electronics and on-board-diagnostic (OBD) system getting involved.”
Having recognised the consumer shift to cheaper and more eco-friendy CNG, OEMs are doing their best to cater to growing demand. This, though, is not the case for the aftermarket which now has to contend with the latest MoRTH notification and awaits a green signal for BS VI CNG kit-fitted vehicles.