India has the most polluted cities in the world. 30 Indian cities figure in the Top 100 Most Polluted Global Cities (in terms of particulate matter PM10) as per data published by World Health Organization in May 2016. Air pollution is the fifth leading cause of death in India.
India has traditionally been a laggard in terms of enforcing and implementing emission norms for the manufacturing sector. Indian auto industry is not an exception to this either. For instance in the capital city of Delhi, vehicles contribute 59%, 50% and 18% of the overall emissions of carbon monoxide, hydrocarbons and nitrous oxides respectively.
There is a strong opinion emerging among policy makers and environmental groups in India that stricter emission standards need to be implemented for all kind of vehicles in the country.
Story of vehicle emission controls began in India when mass emission norms were enforced for the first time for petrol vehicles in 1991 and for diesel vehicles in 1992. Emission norms were further tightened in 1996 with the compulsory fitment of catalytic converters in petrol cars. Bharat Stage emission norms (equivalent to Euro norms for four-wheeled vehicles) were first introduced in 2000. These norms specify the maximum permissible emission limit for carbon monoxide (CO), hydrocarbons (HC), nitrous oxides (NOx) and particulate matter (PM).
Currently, BS-IV norms are applicable in 13 major cities of the country, while BS-III norms are applicable elsewhere. As per Auto Fuel Policy 2025, BS-VI roll out was envisaged for the entire country by 2017, BS-V by 2021 and BS-VI by 2024.
However in a bold move in January 2016, the Union Government of India decided to skip BS-V emission norms altogether and leapfrog directly to BS-VI norms by April 2020. The move to BS-VI norms from BS-IV norms will bring down NOx emissions by 25% in petrol engine vehicle and by 68% in diesel engine vehicles. PM emissions, a major component of outdoor air pollution, are also expected to come down drastically by over 80% in diesel engine vehicles.
What this accelerated shift to BS-VI norms means for the Auto & Auto Component industry in terms of investment, innovation and key growth segments?
Technological Upgrade and Investment
Transitioning to BS-VI norms will require significant engine technology changes including improvements in engine combustion and calibration, increased injection and cylinder pressures, NOx and PM after-treatment solutions and transitioning to electronic controls.
New emission norms will also have to be met in all conditions and not just the ideal testing conditions. Two engine fitments will be typically required for up-gradation of passenger cars to BS-VI norms from BS-IV norms.
1. Diesel Particulate Filter (DPF)- For reduction of PM in diesel vehicles
2. Selective Catalytic Reduction (SCR) Module – For reduction in NOx emissions
Due to this technology upgrade, price of petrol cars are expected to go up by Rs 20,000- 30,000 while diesel passenger vehicles’ prices may go up substantially by Rs 75,000-1,00,000. This will further reduce attractiveness of buying diesel cars (more polluting than petrol cars), with diesel fuel prices moving closer to petrol in recent times.
OEMs with strong market share in diesel cars and auto suppliers with strong dependence on diesel car OEMs are likely to be impacted badly.
It is estimated that auto & auto parts industry in India will have to invest over USD 10 billion to be able to manufacture BS-VI compliant cars. Investments have to be made progressively over the next three years in line with the market demand. There is a need for adding capacity and installing further manufacturing units for DPF and SCR modules specifically.
Adoption of Technology as per Indian requirements
Testing, optimisation and fitment of DPF and SCR technology to Indian conditions will take a few years. It is not possible to simply plug and play with the European technology (compliant with Euro 6 norms) here in India. For example, fitting of DPF into bonnets of small Indian diesel cars will require major design and engineering work. Making bonnets longer may lead to the car exceeding the 4 metre mark, hence losing excise benefits.
Due to low driving speeds in India, it is difficult to achieve temperature (for burning the soot in DPF) of 600 degree Celsius prevalent in European conditions and the Indian manufacturers will have to make do with temperatures around 400 degree Celsius.
OEMs will have to work with the suppliers to customise the solution for the Indian market. There is a tremendous opportunity for Domestic Tier-I and Tier-II suppliers engaged in engine production, fuel injection systems and emission control/ exhaust systems to continuously innovate and develop proprietary technologies suitable for complying with BS-VI norms.
More Complex, Electronic Vehicles
A lot of changes in engine electronics will also be required. ECUs will be required for monitoring the increasing complexity in the engine and measuring the emissions on a real-time basis.
For achieving the specified emissions targets, all reactions will have to be controlled by microprocessors. Increased electronic content per car is good news for domestic and MNC auto electronics players. Testing & measurement vendors providing capabilities like ECU testing, emission testing and fuel systems testing are also likely to benefit a lot.
Addition of new engine and exhaust parts are making cars increasingly complex, making serviceability a big challenge. Neighbourhood service workshops will no longer have the sophisticated skills required to repair the cars of tomorrow and will likely go out of business.
In next decade or so, Hybrid and Electric vehicles are also likely to emerge as reasonable alternative to diesel and petrol engine vehicles in the country. Hybrids in particular are likely to more popular, as they cut down on emissions, maintain high performance levels and boost fuel efficiency.
Auto OEMs in the country would have preferred a more phased shift to BS-VI norms over a period of 6-7 years. Similar is the opinion of most auto suppliers, including the global players in this space.
Friedrich Boecking, Regional President (Diesel Systems), Bosch recently said in an interview “You require four years to graduate from one stage to another. But, if you want to skip one stage, you may want to give at least six years to do that.” However, there is no denying the fact that policymakers are increasingly concerned over high levels of vehicular pollution in the major Indian cities.
This has manifested in terms of initiatives like odd-even scheme, events like “No Car” days and Supreme Court ban on fresh registration of diesel vehicles above engine displacement of 2000 cc in Delhi NCR region. Paris Climate Agreement which Indian signed will also come into effect in the year 2020.
Hence, it is in the interest of OEMs and auto parts maker to start making investments towards this technology shift now, rather than playing a waiting game. The real challenge will be in providing BS-VI compliant vehicles to the end consumers at affordable prices.
This article first appeared in the ET Auto website on 6th June, 2016.