Swaraj Baggonkar Moneycontrol News
India’s automotive sector is set to embrace its biggest challenge yet in less than a year’s time when they begin to rollout Bharat Stage VI (BS-VI) compliant cars.
But even as manufacturers ensure their production is in line with the transition to BS-VI, there is no certainty yet from the government if BS-VI fuel will be available from January 2020, which is what is needed to avoid any major upset.
The government has committed to the Supreme Court that it will make BS-VI grade fuel available by April 1, 2020. This is also when automakers have been asked to stop selling existing BS-IV vehicles and switch to BS-VI overnight.
This is for the first time that the auto industry will follow a sales-bound rather than production-bound deadline. In previous instances, manufacturers were allowed to exhaust their stock of older generation inventory, well after the onset of the new emission standards.
The transition to BS-VI from BS-IV (India has skipped BS-V) will not be without hiccups. For instance, if BS-VI grade fuel is not available across each of India’s 60,000 fuel filling stations from the agreed date, then this would mean BS-VI vehicles will have to run on the lower grade BS-IV fuel.
“A BS-VI vehicle cannot run on BS-IV fuel for more than one or two full tanks. We cannot sell BS-VI vehicles until BS-VI fuel is available across the country. I will have to start selling BS-VI vehicles sometime in February and start ramping down BS-IV. It is a mammoth task,” said Pawan Goenka, Managing Director, Mahindra & Mahindra (M&M).
According to manufacturers, there seems to be no issue running BS-VI petrol vehicles on BS-IV fuel, however, diesel will present a different story. Manufacturers say that running a BS-VI diesel vehicle on BS-IV fuel will damage the engine beyond repair.
RC Bhargava, Chairman, Maruti Suzuki, said, “BS-VI car can use BS-IV petrol. But as far as diesel is concerned, it is not the same. The quantity of sulphur in BS-IV fuel is high and this would adversely impact the catalyst, which goes into the BS-VI car. Our first BS-VI car will come in a few months. I am not sure when the diesel BS-VI fuel will be available.”
While the share new diesel car demand is expected to come down to 25 percent during the BS-VI regime from the current 40 percent, a majority of sports utility vehicles will continue to be powered by diesel engines even though small cars will have migrated to petrol.
Rajesh Goel, Senior Vice-President and Director (Sales and Marketing), Honda Cars India, said, “We do not need to upgrade or make any changes to the Civic and CR-V petrol versions because they are already BS-VI compliant models. All other models of Honda will get upgraded to BS-VI before the deadline. Our BS-VI petrol cars will emit BS-IV emissions on BS-IV fuel. Diesel will be a different story though.”
Managing production Another challenge for the industry is to regulate BS-IV grade vehicle production while managing supply of BS-VI grade vehicles. Any miscalculation will either lead to unsold inventory or loss in market share.
To explain, if BS-IV vehicles remain unsold by March 31, 2020, then they will become obsolete the following day. Similarly, if there is not enough stock of BS-IV vehicles with a particular manufacturer, then buyers will jump to a rival manufacturer, leading to a loss in market share.
Unlike the earlier transition in 2017 when manufacturers converted unsold BS-III vehicles to BS-IV, such a conversion won’t be possible for BS-VI, said Goenka. The only route perhaps would be to export those unsold stock, but not all Indian vehicle models are exported.
Fuel at pumps .
“It takes three months for the storage tanks to dispense BS-VI fuel. If you want the BS-VI fuel in January 2020, the fuel pumps will have to start storing the fuel from October itself. The tanks will dispense a mixture of BS-IV and BS-VI fuel, because it is not the case of first-in, first-out (FIFO). For pure BS-VI dispensation, it will take three months. That is what they call as purging of tanks. What that means is that from October 1, there should be only BS-VI fuel in tanks,” said a senior executive of a leading auto company.
As for fuel station owners there is no formal communiqué from the government yet on the issue of availability of BS-VI fuel. “We have not heard anything yet from the oil marketing companies by when they will provide BS-VI grade fuel. We are following the deadline that the government has agreed to which is April 1, 2020. The transition to BS-VI is the Y2K moment for the auto industry. What we need is a certainty in availability of BS-VI fuel,” said a member of Western India Petroleum Dealers Association.
"From January 2020, we will have to start selling BS-VI vehicles in small quantities. By that time we will ramp down BS-IV production and ramp up BS-VI output. If the fuel comes on April 1, we cannot manage that. The latest it should come is January 1, the earlier the better it is,” Goenka added.
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