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Opinion - 2019: The Beginning Of The Transformation Of Indian Auto Industry

  • Dec 20, 2018
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The Indian four-wheeler industry boasts of a wide range of cars, right from affordable Maruti Suzukis and Hyundais to very sophisticated machines from the likes of Lamborghini and Rolls-Royce. Although we have a range of cars to choose from, not all of these cars are of the highest standards, especially when compared to the ones offered overseas. In the race to offer the most value-for-money cars, manufacturers have had to make compromises here and there. Usually, it’s either in the way a car is manufactured or in its equipment list. But all that is going to change, and the transformation is going to happen sooner than you may have thought.


The year 2019 marks the beginning of the end of the Indian four-wheeler industry trailing major global markets in terms of the sophistication on offer in cars. In the coming years, India aims to become one of those countries where the latest technologies are offered in the latest cars. To this effect, the government is currently considering making features like AEB (autonomous emergency braking) standard across cars sold in the country.


But before that happens, here are some of the other major changes that are certainly going to take place in 2019 and the years to follow. It’s safe to assume that these changes are going to transform the Indian four-wheeler industry like never before.


Strengthening the ‘weak’ links


By the end of 2019, all new cars on sale in India will comply with the latest Bharat New Vehicle Safety Assessment Program (BNVSAP) crash safety regulations. Simply put, BNVSAP will be India’s own version of the New Car Assessment Program (NCAP). Under this, every new car will have to undergo and pass front, offset and side impact tests. The new regulations also make dual airbags mandatory on all four-wheelers. And going forward, like every other NCAP around the world, BNVSAP will continue to tighten its safety regulations, thereby making cars in India safer with time.


By 2022, we expect the norms to tighten and cars to get features like AEB and traction control as standard. If that happens, India would stand amongst the developed car markets in terms of standard safety equipment being offered on cars. Needless to say, the cars sold in India will then be comparable with the ones outside.


The beginning of the end of ‘polluting’ cars


India is going to welcome the BSVI emission norms in April 2020. So, post 31 March, 2020, all cars, whether powered by a petrol engine or a diesel, will have to conform to BSVI emission standards. These standards will be more or less the same as Euro 6 emission norms. The cars, whether petrol or diesel, conforming to BSVI standards would certainly be less polluting than BSIV cars. Along with the implementation of BSVI norms, the quality of fuel sold in the country is also set to improve. BSVI fuel in BSVI engines will ultimately lower the level of pollution from vehicular exhaust gases.


Maruti Suzuki, India’s largest carmaker in terms of vehicle sales, has already said on record that it would end the production of BSIV cars by the end of 2019, and will start producing BSVI cars from January 2020 onwards. The carmaker has also said that any new model that it launches in the FY 2019-20 will be powered by BSVI petrol engines. Other carmakers are also expected to follow suit.


The only pitfall of the new emission regulations is that new cars are going to get a lot more expensive. In order to meet the new norms, petrol cars are expected to become around Rs 10,000 to Rs 20,000 more expensive than the current prices. Meanwhile, diesel car prices are set to go up by around Rs 1 lakh to Rs 1.5 lakh. The increase in cost is due to the expensive hardware that needs to be fitted in their engines to help them comply with new regulations.


The beginning of the end of ‘small’ diesel cars


A massive price difference between diesel cars and their petrol counterparts will certainly deter buyers from buying small diesel cars. Affordable diesel cars sold today, like the Swift in Maruti’s case, will get more expensive by around 25 per cent! If the demand does drop, manufacturers will either have to stop producing such diesel cars or manufacture them in low numbers to cater to specific needs.


A similar price increase will happen throughout the car industry, but the incremental cost will not impact the more expensive luxury cars. For example, for a car priced around the Rs 30 lakh mark, an increase in price of Rs 1.5 lakh will only be 5 per cent of the cost of the car. So, for bigger and more expensive cars, diesel powertrains will continue to remain practical.


Hello electric!


It’s not that we’ve not had electric cars in India in the past. Kudos to Mahindra for bringing electric four wheelers to India before any other carmaker. At the same time, the electric cars on offer currently aren’t really practical because of their low range.


But starting 2019, we expect long range electric cars to finally come to the market. These cars will have a range in excess of 200km, which would make intercity travel possible. Hyundai has already announced that it will bring its Kona Electric SUV to India in 2019 and we’re also expecting a new electric SUV from MG Motor in 2020. In the luxury segment, Audi is set to introduce its electric SUV -- the e-tron -- in India sometime in 2019-20.


While electric cars will continue to be significantly more expensive than their conventional counterparts, these would help make the conditions more conducive for EV acceptance in India. With more carmakers entering the electric scene, we also expect comparatively brisk progress in the development of infrastructure for electric vehicles.


Overall, 2019 seems to be the beginning of the transformation of the Indian car industry. This year, we expect carmakers to reveal their future plans for the Indian market. Cars in the entry-level segment will undergo structural and feature changes, making them safer than before. Carmakers will also have to plan their production and sales keeping the switch from BSIV to BSVI emission norms in mind.


Although 2018 saw a shift in buyer preference from petrol to diesel-powered cars, we expect sales of diesel cars to pick up next year since they are set to receive massive price hikes in the following year. And 2020 may finally be the year when we get see the demand for diesel engines dropping to its lowest levels for smaller cars.


It will be 2020 when BSVI norms come into force and that would dramatically change the scene in the mass-market segments. Apart from having to deal with the tricky situation of clearing their BSIV inventory, carmakers will also have to strategise the pricing of their cars. It will be the year carmakers prepare themselves for major changes in the Indian four-wheeler industry. Hence, its safe to say that the year 2019 will lay the foundation of a more action-packed 2020 that promises to transform the Indian car industry for the better.

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