The Supreme Court’s decision banning registration of diesel vehicles with engines of 2000 cc and higher capacity in the National Capital Region is “unfortunate”, as the move will hit the nascent recovery in the industry, car makers said. The ruling will also impact investments and employment in the automobile sector.
The companies that are likely to be most impacted by the decision are luxury car manufacturers such as Mercedes Benz and Jaguar Land Rover, besides makers of sport utility vehicles like Mahindra and Mahindra, Tata Motors and Toyota.
“The ban creates an environment of uncertainty and will severely impact our expansion plans and future investments put in place for the Indian market,” said German automaker Mercedes-Benz, whose entire diesel vehicle line-up of 24 models is powered by engines above 2,000 cc.
“We also have to consider the loss of jobs that this will result at the dealerships, at the vendors producing diesel engines and also negatively impacting our own workforce,” the company said in a statement on Wednesday.
By contrast, the order will impact only six models of BMW out of its 20 models sold in India, while only two of Audi will be affected.
“The pollution issue in Delhi needs to be looked at holistically if the objective of improving the air quality is to be achieved,” industry body SIAM said.
SIAM said while the decision would certainly hurt some segments of the automotive industry, it would, however, not bring about any perceptible improvement in the air quality of Delhi.
Delhi NCR, which is one of the biggest luxury car markets in India, contributes about 7 per cent of the overall passenger vehicle sales. The contribution of diesel vehicles is about 2-3 per cent of the overall industry volumes, according to Angel Broking.
Mahindra Group Chariman Anand Mahindra took to Twitter to express discontent over the ban saying it was not optimal.
In a series of tweets, he said, “We thrive on challenges and rise above them. We'll surprise everyone with our resilience…just as we have done for decades. At the core of Mahindra's DNA is the unshakeable belief that 'When the going gets tough, Mahindra gets going… So even if we believe the decision on diesel vehicles isn't optimal, we'll honour it and develop vehicles that comply with their stipulations.”
About 95 per cent of M&M’s passenger vehicle portfolio is above the 2,000 cc range. The company said in a stock exchange filing that the vehicles affected by the court ruling represent about 2 per cent of the company's total monthly sales. M&M Executive Director Pawan Goenka told analysts that the company's dealerships in the NCR have inventory worth Rs. 100 crore.
“Auto makers will suffer big losses. They have made huge investment in diesel technology as per demand from consumers. It will take nine to 12 months to come out with appropriate engines,” said Abdul Majeed, Leader, Automotive, at PwC.
Tata Motors too said it will see some impact on sales in the 3-month period specified in the order. The long term regulatory regime should focus on the overall emissions-control roadmap rather than any specific fuel or technology, a Tata spokesperson said in an e-mailed statement.
Experts said the decision will impact the entire value chain, including production, sourcing, procurement, inventory management, among others.