The Amalgamations Group, with its diverse range of products including pistons, piston rings, engine bearings and clutch assemblies, among others, is ready for the BS-VI challenge. Mr. Ram Venkataramani, MD, IP Rings, and Director on several component manufacturing and distribution companies in The Amalgamations Group including India Pistons, AMREP and George Oakes, who is also the current ACMA President, tells us the likely impact of BS-VI on the market, its pros & cons and what needs to be done to get the industry up and running again.
Excerpts:
Market impact
BS-VI is expected to make both gasoline and diesel vehicles cost more by anywhere between 4 and 12 per cent. Generally, post an emission norm change, volumes are expected to be subdued.
On the positive side, Indian auto parts will now be on par with what’s being used in other geographies compliant with Euro 6 emission norms. This could provide an export opportunity for us.
As far as the component companies in The Amalgamations Group are concerned, we are ready with BS-VI compliant products, be it pistons, piston rings, engine bearings and clutch assemblies.
Our partners Valeo, Daido Metal and NPR are working closely with us and the local customers to ensure that we are fully ready for the switch over.
Cost implications
Usually there is a pre-buy that occurs prior to a new emission regulation change. And then with fleets on road, there would be a lull in sales before it picks up again.
However, this time due to various factors like increased cost of acquisition of vehicles, non-availability of competitive finance and ambiguity around potential regulatory changes, consumers have stayed away from new purchases.
The wish from the industry is that some government interventions such as reduction in GST rates and an effective scrappage policy for more polluting vehicles could offset the higher cost vehicles and kick-start demand again.
Challenges
The move from BS-IV to BS-VI directly within a span of 3.5 years has in itself been a huge challenge for the industry.
The industry has invested close to Rs. 1,00,000 crores to meet the new emission norms. Out of this, approximately 40 per cent has been made by the component makers. The industry is under pressure to recover the investment. Announcements about transition to EVs and changing deadlines makes the industry apprehensive about investing in further capacities.
Engines are now more compact, use more electronics and sensors to meet the tighter NOx, HC and CO emissions. The lack of capabilities in electronics in these new tech areas could lead to increased imports.
To produce these new technology items consistently would prove another challenge since we are transitioning in a very short time.
Opportunities
The Indian auto component companies are already world-class. We export approximately parts worth $15 billion to vehicle makers in advanced markets like the US and Europe. When we supply products adhering to the new emission norms, India will be perceived as a supplier of contemporary technology products and not only a supplier of general engineering components and therefore move up the value chain. Therefore, the potential market for value-added parts would increase. Although in the medium-term, component makers could face increased costs due to investments made, poorer yields, higher rejections, etc.
Outlook
Downturns in the auto industry are nothing new. However, both in 2009 and 2014, the governments stepped in very quickly with reduction in duties, JnNURM schemes for STUs to buy buses and demand was kick-started.
This time also we are confident that the government will consider the recommendations made by the industry to help stimulate demand.