On our Editor's Pick of the Day today, we bring to you a Moneycontrol exclusive. Swaraj Baggonkar (@swarajsb) brings us an exclusive chat with Siddharth Lal, Director and CEO of Eicher Motors, whose flagship brand Royal Enfield, Lal is credited to have turned into a global brand.
In this chat, Lal spoke about how certain new norms that will be in place soon could turn small bikes nearly as expensive as the big ones. What these norms are and what the prices are going to look like are the central topics we will be discussing today. Buckle up; it’s going to be, well, a smooth ride. Bumpy, if you are planning on buying a bike in the near future. My name is Rakesh Sharma, and you are listening to Moneycontrol.
Commuter bikes could cost as much as premium bikes after new regulatory and emission norms start getting implemented from next year, a top executive of a motorcycle manufacturer, Siddharth Lal of Eicher Motors told Moneycontrol.
Onset of the anti-lock braking system (ABS) regulation next year (for all existing 125cc-and-above models), on-board diagnostics (OBD), raw material pricing pressure and Bharat Stage VI implementation in 2020 would push costs of 150-180cc bikes closer that of 350cc bikes.
"There may be some movement from smaller bikes to bigger bikes because the delta rupee cost (increase) will be the same for everybody by and large, when ABS next year and BS-VI the year after the 150cc bike will cost the same as 350cc," Siddhartha Lal, Managing Director and CEO, Eicher Motors, told Moneycontrol.
Research and rating agency ICRA has predicted a jump of as much as 20 percent in costs of two-wheelers just because of the implementation of BS-VI norms.
To ensure that they are compliant with the norms, two-wheeler makers would need to come up with a completely new layout for fuel injection, air parts, and after treatment of the vehicle. The installation of next-generation OBDs will only add to the rise in prices of two-wheelers.
Honda's recently launched, 163cc, four-stroke bike X-Blade costs Rs 80,000, while the 180cc Pulsar costs Rs 83,500 (ex-showroom, Delhi). A 20 percent hike in the price of the model would put it closer to Rs 1 lakh, which would put it in the same range as the base version of the Royal Enfield Bullet, which costs Rs 1.09 lakh.
Delhi-based Eicher Motors controls Royal Enfield, which is the largest niche bike maker in the country and has models like Classic, Himalayan, Continental GT, Bullet and Thunderbird in its stable. Although Royal Enfield is putting everything behind its expansion plan, which involves the addition of 350,000 units in new capacity next year, it is expecting demand to soften a bit after BS-VI norms come into play in April 2020.
"We are still in market-expansion phase. Sure, the loss of demand will be there, but when we are betting on expanding the market, we will continue to grow. Our distribution has been growing rapidly," Lal said.
According to data shared by the Society of Indian Automobile Manufacturers (SIAM), sales of 150cc-200cc bikes rose 43 percent year on year to 8.45 lakh units. There are more than 20 models in this segment (including their variants) from companies like Bajaj Auto, KTM, TVS Motor Company, Suzuki and Honda.
Other players like Honda Motorcycle and Scooter India (HMSI), the country's second largest two-wheeler manufacturer, is against adding new capacity before 2020, despite operating its existing plants at an average utilisation of over 95 percent.
"We expect overall two-wheeler volumes of the industry to go down post the implementation of Bharat Stage VI (BS-VI). There will be a price increase because of the mandatory implementation of ABS technology from April 1, 2019 and because of the BS-VI from April 1, 2020," Minoru Kato, President and CEO, HMSI, told Moneycontrol.
There are a few terms and norms we need to understand here. First, what are the Bharat Stage VI norms?
At par with its Europen counterpart “Euro-VI”, under the BS-VI standard fuel, petrol and diesel are at the same level of emissions. Apart from this, while BS IV-compliant fuels which are currently being used in the country, has 50 parts per million (ppm) sulphur, BS VI emits a low 10 ppm. The move is being welcomed by the Supreme Court-appointed Environment Pollution Control Authority (EPCA) that had earlier in April this year recommended to the apex court that only BS-VI emission standards compliant vehicles should be allowed to be sold from April 1, 2020.
“This is a welcoming move as after the Petroleum Ministry (on BS-VI implementation), the Ministry of Road Transport has taken a wise step,” said Usman Naseem, researcher at the Centre for Science and Environment and member of the EPCA. With this emission norm coming into effect, India will come at par with the US, European countries and other advanced automotive markets across the globe. India is currently following BS-IV norms.
Why the jump from BS-IV to BS-VI? Because well, we are that polluted. It is not a stat that you will read on your patriotism groups on WhatsApp because for one, it is factual, and for another, it is mortifying. India is a country with 10 most populated cities of the world. In some places in Delhi, the levels of fine particles that cause the most lung damage, called PM2.5, routinely exceed 1,000 in winter in part because small trash and other fires are so common, according to scientists. In Beijing, PM2.5 levels that exceed 500 make international headlines; here, levels twice that high are largely ignored.
Delhi is quietly suffering from a dire pediatric respiratory crisis, with a recent study showing that nearly half of the city’s 4.4 million schoolchildren have irreversible lung damage from the poisonous air. Sarath Guttikunda, one of India’s top pollution researchers, who moved to Goa, on the west coast of India, to protect his two young children, was unequivocal: “If you have the option to live elsewhere, you should not raise children in Delhi.” Sarath was speaking to Gardiner Harris, who was a South Asia correspondent for The New York Times and wrote an impassioned piece about what living in Delhi did to his young son’s respiratory health. I highly recommend that you read it. It is not just Delhi though. 14 of the 15 most polluted cities in the world are in India, according to 2018 statistics. You would think they would be the big cities, but they are not. Gwalior, Allahabad, Raipur, Kanpur, Ludhiana are among the names you will find there.
Why should we care about air quality, you ask? Research suggests that reduced lung capacity in adults is a highly accurate predictor of early death and disability — perhaps more than elevated blood pressure or cholesterol.
Vehicular emission is a major contributor to the worsening air quality of Indian cities. Emission of Nitrogen Oxide, Sulphur-di-oxide, Carbon-di-Oxide and particulate matter is taking a toll on people’s health. In October 2016, India signed the Conference of Protocol also known as the Paris Climate Agreement. Being a signatory to the agreement, India is obligated to bring down the carbon footprint by 33-55 percent from the levels recorded in 2005 in the next 12 years. This warranted the need for a stricter norm that could reduce the emissions considerably and put India on track to meet the Paris agreement goals. Ideally, BS V would have been rolled out by 2021 and BS VI in 2024 but leapfrog to Bharat Stage VI norms by 2020 had to be planned because of the carbon footprint obligations.
Some benefits of BS VI over BS-IV are as follows:
• Nitrogen Oxide emission will come down by approximately 25 percent for the petrol engine and 68 percent for the diesel engines.
• The PM emission will see a substantial decrease of 80 percent in diesel engines.
• OBD will become mandatory for every vehicle and it will help monitor the pollution caused by the vehicle in real time.
• RDE (Real Driving Emission) will be introduced for the first time that will measure the emission in real-world conditions and not just under test conditions.
• Bharat Stage VI norms will also change the way particulate matter is measured. It will now be measured by number standard instead of mass standard thereby, regulating the fine particulate matter as well.
You also heard me mention something called ABS. That stands for Anti-lock Breaking System. This will be a norm for new models from April 1, 2018 and for existing models from April 1, 2019. The proposed norms mandate CBS or Combined Brake System in two-wheelers below 125cc and ABS in vehicles above 125cc. The new regulation is likely to have some price implications for buyers. Estimates suggest that an ABS unit may make a bike expensive by 10,000-15,000 rupees, while a CBS unit may push up prices by a relatively low 1,000-2000 rupees.
“All our models will meet the new safety norms. We will have either CBS or ABS depending upon the category of the vehicle,” said KN Radhakrishnan, President and CEO, TVS Motor Company,s peaking to Hindu Business Line in February this year. But he did not elaborate on the impact on the price. “ABS and CBS have different functions. CBS will make sure that both the front and rear brakes are applied to avoid nosediving and get more deceleration than conventional brakes. In ABS, the wheels do not lock and prevents skidding and allow handling while braking. But ABS is more expensive than CBS,” reported Hindu Business Line. Large scale adoption and local manufacturing of the systems, industry watchers believe, will eventually bring down the prices but they do believe that initially it will be a hit to the consumer. Safety is believed to be a luxury in the country and not the norm.
BS-VI implementation comes with its own challenges for the OEMs – that is Original Equipment Manufacturers. There are constraints related to emission, concerns over fuel grade, automotive electronics and embedded systems-related concerns, among others. We have also spoken about the cost implications that ABS and BS-VI come with.
But functioning lungs and safer rides and longer lives are probably good things to get in the bargain even if they come with a slightly enhanced price tag. If you want to ride off into the sunset all happy and jolly, one basic requirement is that you be alive.
Thank you for joining us.