Is India ready for the post-diesel era?

The diesel engine has never faced such an existential crisis. Across the world its popularity as a powertrain for passenger vehicles is on the decline. Europe, its biggest market (53 per cent of all cars sold is powered by diesel), is fast giving up on the fuel it favoured the most till recently.

France, where diesel cars account for 70 per cent of its overall fleet, saw more petrol cars being sold in 2017. In neighbouring Germany, the share of diesel cars fell from 48 per cent in 2012 to 33 per cent in 2018. If ‘dieselgate’ has left it badly stigmatised, the tightening emission norms are sounding the death knell for diesel engines around the world.

India too will be impacted by this development and it needs to act appropriately to manage the transition.

India’s love for diesel powertrains peaked in 2012-13. That was a time when diesel cars accounted for 47 per cent of all passenger vehicles sold in the country. This fad was driven more by cheaper diesel prices (it was lower than petrol by as much as ₹25 per litre) than for any other reasons.

That changed when government de-controlled diesel prices in October 2014. As the price differential between diesel and petrol narrowed, the equation changed. Today, only 23 per cent of the cars sold have diesel powertrains.

But the Indian government’s decision to leapfrog from BS-IV to BS-VI emission norms directly will impact diesel engines the hardest and will force India to promote electrification and hybridisation more seriously. It will also be forced to re-imagine public transportation and movement of goods by road.

Globally the initial stages of emission norms focussed on carbon-di-oxide emission. Euro-I to Euro-4 emission norms did just that. Diesel engines performed well on this account as they emitted lower CO2 and this saw most European countries promoting diesel cars with incentives.

As emission norms evolved, it became clear that particulate matter (PM) and Oxides of Nitrogen (NOx) were equally dangerous. This ended diesel engines’ dream run as they emit higher levels of PM and Nox than petrol engines. Euro-V norms that were introduced in 2010 focussed on reducing PM while Euro-VI norms that came into force in 2015 targeted NOx.

Costly exercise

As India chose to go directly to BS-VI from April 2020, the manufacturers have to tackle both PM and NOx in one go.

That is not easy as it involves a complex exhaust system such as a selective catalytic reduction (SCR) and a tail pipe particulate filter to reduce NOx and PM in line with BS-VI norms. SCR does this by converting NOx to nitrogen by pumping in liquid urea to react with the exhaust while the filter reduces the PM coming out of the vehicle to the required level.

This system will cost upwards of ₹1.50 lakh depending on the size of the engine. Such cost escalation will price small, compact and entry level diesel sedans out of the market. Only pricey SUVs will be able to absorb this cost. Come April 2020, the share of diesel cars in India will see another significant drop in the volume segment.

This poses multiple challenges for the manufacturers, especially those who have set up large diesel engine capacity. They will have to compensate for fall in domestic demand by pushing exports. The fact that India will be on a par with the developed world in terms of emission norms will help as it opens up a large export market for them.

Predominantly diesel car manufacturers will have to change tact. Mahindra & Mahindra is looking at petrol engine options across all its models barring Bolero. Tata Motors too will have to do the same.

Shift to petrol?

But shifting to petrol powertrains will open another front for the manufacturers — the CAFE norms. The Corporate Average Fuel Efficiency norms, that came into force from April 2017, mandates that average corporate CO2 emission be less than 130 gm per km till 2022 and below 113 gm per kilometre thereafter. Diesel cars help manufacturers meet these norms. The shift to petrol would increase the CO2 emission and the manufacturers can meet the CAFE norms only by producing more fuel efficient petrol cars or electric/hybrid vehicles.

Electrification will definitely help but in India where bulk of the cars sold are small cars, the cost may just not work out. Though battery costs have come down substantially over the years, it is still not low enough by Indian standards.

A compact car will typically need a 20 kWh battery and considering that 1 kWh battery costs $150 or more, an electric powertrain alone will cost ₹4-5 lakh.

That is probably the reason Maruti Suzuki is focussing a lot more on hybrids. Under the circumstances, denying tax breaks — that electric vehicles enjoy — to hybrid vehicles appears irrational.

Green push

Rather the government should catalyse this shift to green vehicles by offering technology agnostic incentives. Its vision of 100 per cent electrification of passenger vehicle sales by 2030 may be aspirational but achieving even a third of that target would bring about a massive change. Leapfrogging to BS-VI norms has, in a way, set the tone for it.

The government can speed up things by coming out with Faster Adoption and Manufacturing of Electric Vehicles (FAME) – 2 norms which should incentivise the manufacturer rather than the buyer.

Costlier diesel engines will also increase the cost of public and goods transportation. Policies therefore should push buses with urban applications (city buses and corporate fleet) to embrace electrification.

As regards goods movement, the only option is to reduce the heavy share of road transportation by focussing on coastal shipping and use of inland waterways to move goods.

The transition away from diesel is inevitable. Faster the government and India Inc realise this and act, smoother will be the transition.