BASF, world’s leading supplier of catalysts, has unmatched expertise in the development of emission control technologies. Mr. Brieux Boisdequin – Vice President, Automotive Businesses, Strategy & New Business Development South Asia, BASF, gives his expert opinion on the Indian auto sector’s BS-VI move.
Excerpts:
Market impact
A move or transition at this level when we are considering a direct leapfrog from BS-IV to BS-VI will have major impact on the automotive industry in India.
For automobile manufacturers, this means they may have to manage higher inventory levels as consumers adopt a wait and watch attitude towards buying vehicles either by delaying their purchase to move to BS-VI compliant vehicles or in hopes of massive discounts from automobile manufacturers as they try to reduce inventory levels for BS-IV vehicles near March 2020. We therefore believe that this may lead to major fluctuations in automotive demand this year.
The tightening of emission regulations will require complex engineering changes in the vehicle and extremely efficient after treatment systems. Catalytic converters will play a critical role in achieving these norms. For light duty gasoline vehicles, the regulations will require advanced TWC technologies and FWC technologies to remove particulate matter. Heavy duty regulations will require truck and bus manufacturers to add another filter to their emission control systems. This increase in size and complexity of emission control systems. BASF recognizes the challenges that automotive manufacturers face, such as space and weight limitation. We continue to develop technologies to solve these challenges and meet these needs.
Cost implications
There is a definite possibility of auto manufacturers partially passing on the cost of BS-VI compliant vehicles on to consumers as BS-VI norms require more fuel-efficient engines and exhaust treatment systems which are going to be costlier compared to BS-IV compliant vehicles. In addition to fuel-efficient vehicles, the demand for BS-VI compliant fuel solutions and additives that are required by such engines is likely to increase in the future, possibly even ahead of the April 2020 timeline. For BASF, this transition is expected to have a positive impact as mobile emission catalysts that reduce emissions will play a critical role in BS-VI compliant vehicles. We are one of the most prepared partners for the automotive industry in India when it comes to transitioning to BS-VI since we are expanding our mobile emissions catalyst facility in Chennai right on time and are continuously evaluating further investments.
BASF has mature technologies and is ready to help OEMs. BASF has partnered and closely co-operated with automotive manufacturer at an early stage of automotive engineering, to better understand their engine specifications and requirements, so that we can optimize the catalyst performance for their specific engine to provide effective and efficient after-treatment systems with regards to cost and size.
Challenges
Following could prove to be the top challenges for the auto industry once BS-VI kicks in:
- Managing inventory and sales of BS-IV compliant vehicles without enduring major opportunity losses or left-over inventory beyond deadline.
- Uncertainties of the fuel availability across the country for vehicles sold ahead of the April 2020 deadline
iii. Recovering the R&D investment for BS-VI vehicles in a short time frame could prove to be challenging while OEMs also work on complying with e-mobility directives from the government.
Opportunities
As stated above, despite the uncertainty looming currently in the automotive industry, there definitely exist opportunities to innovate with better technology and partners who can offer a technological advantage. We may also see some consolidation of engine platforms as auto manufacturers focus on large volume platforms and the emergence of large mobile emission treatment companies in the field of commercial vehicles for example. From the environmental perspective, we could see that a declining share of diesel engines could prove beneficial for air quality as well.
Outlook
Yes, the current year has been challenging so far with some uncertainty on the growth prospects of the auto industry in FY19-20. We have already come across reports stating that July 2019 was one of the worst months in terms of automotive sales for the last two decades. Lack of liquidity, poor GDP growth forecast as well as factors such as new policies in terms of insurance, safety requirements, etc., have led to consumers holding onto their purchase decisions and adopting the wait and watch attitude.
Despite this difficult business environment, so far, BASF India has been able to maintain volumes of automotive solutions to a similar level as previous year. We are confident that with the unique technology solutions and co-creation platforms like the Creation Center in Mumbai, we will be able to collaborate even better with our customers to meet the market needs.