SC lifts ban on registration of luxury diesel cars in NCR

In a relief to automotive industry, the Supreme Court on Friday lifted the ban on registration of diesel cars in the National Capital Region, subject to a 1 percent cess paid at the time of registration.The ban was imposed on diesel passenger vehicles with 2 litres plus engine capacity concerns that such vehicles are more polluting than other fuel options such as petrol or CNG.Pravin Shah, President and Chief Executive – Automotive Division, M&M, hailed the order as a sentimental positive for the industry though he said the financial impact of the ban was not much.The NCR region contributes about 7 percent to the country's auto sales, while diesel car sales are less than half that. (Large engine diesel vehicles even less still.) M&M, however, was still one of the most impacted by the ban, given that its popular SUVs were among those banned.Shah added that the additional cess may impact diesel car sales in the region, which have anyway fallen from a peak of 50 percent countrywide market share to under 30 percent, as buyers may opt for cheaper petrol or CNG vehicles.Maruti Suzuki Chairman RC Bhargava said the court, in lifting the ban, had given weight to the government and auto industry's views — as offering to pay an additional environmental cess was one of the suggestions made by automakers — and termed the decision as a "right step".Below is the verbatim transcript of Pravin Shah and RC Bhargava’s interview to Anuj Singhal and Sonia Shenoy on CNBC-TV18.Sonia: This is breaking news that we are getting on our screen, the diesel ban has been lifted. There are some more comments coming in as well in terms of a cess etc. But how much of a positive and how relieved would you be at M&M?Shah: This was a long pending decision and I am very to say that the Supreme Court has come up with the decision and we welcome the decision. Since this ban was imposed from December 2015 I am sure there will be more understanding of this order as we go along but the lifting of the ban itself is a right thing to do and I am sure the Supreme Court would have evaluated the rationale and reason for the same and I on behalf of the industry and on behalf of Mahindra can surely say that this is something which is a right decision which has come though it has got delayed but we are happy to hear that the ban has been lifted.Anuj: So, if you could give us some numbers in terms of volumes and the kind of impact it will have on a company like Mahindra and Mahindra?Shah: Actually more than the volume I would say that the sentiments which were not for the right reason were spreading against diesel that will come to rest and that itself is a big relief. So far as Mahindra is concerned surely actually it had an impact in the past but as we know we have had a right product with which we had gone to the market including in Delhi NCR with the 1.99 diesel engine. So, the impact to Mahindra wasn\\'t that big but the indirect impact of the sentiment I am sure actually going forward with the lifting of this ban should help the industry and bring back the diesel to its right place.Sonia: Since December 2015 up until now since the ban was imposed what has been the fall in diesel sales or for the industry as a whole and for Delhi NCR what chunk or what is the contribution of Delhi NCR to the overall market in terms of percent?Shah: Actually the percents have changed and surely the diesel percent have fallen. The overall passenger vehicle the diesel percent which has gone through as high as 49 percent has slipped to somewhere below 30 percent. So, this is what was really has happened over a period of time. I am sure the customer will have now an opportunity to select and choose the fuel mode.Anuj: The risk was that will this now spread to other states and all. Now that the Supreme Court itself has cleared this, that is a big headwind out of the way. Will we have more investments in newer models in this particular space? That of course has done well for M&M in the past.Shah: We have not stopped anything as we sense today, but surely we also had plans for balancing our portfolio and we have sufficient investments, both on diesel as well as on gasoline going forward. Sonia: This is a sigh of relief for the sector as a whole because the ban has now been lifted on the diesel vehicles in the Delhi NCR region. Maruti, in any case did not have too much of an impact, because most of its products are less than 2,000 cc. In fact all of it. But nevertheless, how much of a boost do you think this will give the industry as a whole?Bhargava: What is important about the lifting of this ban is that A] the court has given weight to what the government said on this matter and what in the industry has been saying. But it would not have happened without government coming out with a very clear statement. And as far as the industry’s effect is concerned, the sentiment against diesel, that sentiment will again reverse and we will have a more balanced buying option with people relating to petrol and diesel.Sonia: So, do you see an immediate recovery in sentiment because even before this ban, the percentage of diesel car sales has been falling if you look at the overall pie.Bhargava: It will take some time for reversal to happen. But the reversal process will start now.Anuj: So, do you think levying a cess is a better way and something on that effect will be done. So, do you think this is a problem better solved by levying a one-time cess when buying a vehicle? Would you support that?Bhargava: These question on what kind of cess, government has already put a cess on diesel cars. These decisions are best left to the government.Sonia: But how do you see the sentiment as a whole pan out from here on?Bhargava: It will certainly have a positive impact on sentiment.Sonia: So, what kind of a growth would you expect to see in diesel car sales?Bhargava: I will not speculate on that.Anuj: All your vehicles are below 2,000 cc capacity as Sonia also pointed out, but in the future, do you have any plans to get into the above 2,000 cc diesel vehicles as well?Bhargava: No, nothing at the moment that I know of.Anuj: No, not at the moment, but in maybe the foreseeable future or in say medium-term future.Bhargava: Okay, let me change that ‘moment’ to the ‘foreseeable future’.