automotive the effects of bs 6 and 2 regulations in...

© 2016 IHS Markit. All Rights Reserved.© 2016 IHS Markit. All Rights Reserved.

The effects of BS 6 and CO2 regulations in India

AUTOMOTIVE

Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 88610 77100, [email protected]

19 October 2016 | Tokyo

Contents

© 2016 IHS Markit

AGENDA 3

PRESENTERS 3

INTRODUCTION BS 6 Emission Norm 4 CO2 Regulation 5 FAME 6-7

BACKGROUND 8

OEMS’ POWERTRAIN STRATEGY Steps 11 The key players 12-13 Cost of BS6 compliance 14 Maruti Suzuki 15-16

CONSUMER EVOLUTION Petrol vs Diesel 18 Why diesel is losing favor? 19-21 Success of mild-hybrids 22-23 Potential of mild-hybrids 24 Auto-shifts 25-26

IMPLEMENTATION CHALLENGES OEMs 28 Government 29 Oil companies 30-31 Conclusion 32 Appendix

2

BS 6 & CO2 Regulations / October 2016

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Introduction

Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 8861077100, [email protected]


© 2016 IHS Markit

BS 6 - Emission Norms Schedule

4

Automotive Conference – Tokyo | October 2016

Region/Year 2010 2016 2017 2019 2020 2022Select Cities

Rest of India

New ScheduleAcross India

BS VBS IV

BS IIIBS VI

BS VI

BS IV

BS IV

Schedule

HC

NOx

PN

HC + NOx

NOx

PM

Pollutants

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0

1

2

3

4

5

6

7

500 600 700 800 900 1000 1100 1200 1300 1400 1500

FY 2017-18 to 2021-22 FY 2022-23 onwards Petrol

Diesel Diesel with Mild

CO2 Regulations – CAFE Norms

5


Constants

FY 2017to FY 2021

FY 2022 onwards

a 0.0024 0.002

b 1037 1145

c 5.4922 4.7694

Averaged unladen mass (kg)

Ave

rage

d Fu

el E

cono

my

(L/1

00km

)

CAFE Targets : Starting from 1st April 2017

17% stricter @ 1000kg

FY2022 onwards

FY2017-FY2021

Phase I(FY2017-2021)

Phase II(FY2021 onwards)

130 g/km 113 g/km

Fleet Target

Mild-hybrid

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FAME

6


Faster Adoption and Manufacture of Electric Vehicles, based on the NEMMP 2020:

Phase I (FY2015-FY2017) 170 million USD. 55 million USD for 1st year and 115 million USD for 2nd year.

The investment is further allocated into sub-categories, arranged in order of share of the allocation: Demand incentives Development of technology platform & Testing infra Pilot projects Charging infra IEC/Operations

Phase II (FY2018-FY2021) 200 million USD. Demand incentives Charging infra

IHS estimate

IEC: Information, Education and Communication

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FAME

7


Segment Incentive (₹)

Length < 4m (P<1200cc/D<1500cc)

Level 1 Level 2

Mild HEV (Conventional battery) 13000 16000

Mild HEV (Advanced battery) 19000 23000

Length > 4m Level 1 Level 2

Mild HEV (Conventional battery) 11000 13000

Mild HEV (Advanced battery) 20000 24000

VEHICLE CATEGORY EXCISE DUTY

Small cars (Length < 4m ) 12.50%Length >4m but engine capacity less than 1500cc

24%

Length >4m and engine capacity more than 1500cc

27%

SUVs/MUVs (length >4m, engine capacity >1500cc and Ground clearance >170mm)

30%

Hybrid cars 12.50%

Tax/Incentives

Conventional battery – Lead Acid type Advanced battery – All others

₹10000~$150~¥15100


Background



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Background

9


1. Air Quality

% o

f Lo

catio

n

PM10NO2

2. India’s CO2 Pledge: 20-25% reduction by 2020; 30% by 2030 compared to 2005 levels as base .

3. Overdependence on imported oil.• About 80% of India’s crude demand is met by imports.

4. Government’s aim for alignment with mature markets’ policies.5. Pressure from ‘green’ activists/NGOs.

Source: CPCB

% o

f Lo

catio

n

Low Moderate High Critical


OEMs’ Powertrain Strategy



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OEMs’ Powertrain Strategy - Steps

11


April 2017CO2 RegulationPhase I

April 2017BS 4 Across India

April 2020BS 6Across India

April 2022CO2RegulationPhase II

• Fuel type strategy

• Downsizing• Mild-hybrids

• Phase out legacy platforms.

• Emission reduction strategy

• Electrification

Investment

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0%10%20%30%40%50%60%70%

2016 2018 2020 2022 2025

Auto-shift Electrification GDI

OEMs’ Powertrain Strategy – The key players

12


0%

10%

20%

30%

40%

2016 2018 2020 2022 2025Auto-shift Electrification GDI

0%

5%

10%

15%

20%

25%

30%

2016 2018 2020 2022 20250%

10%20%30%40%50%60%70%80%

2016 2018 2020 2022 2025

Tata Mahindra

Electrification = Stop/Start + Mild-Hybrid + Full-Hybrid

© 2016 IHS Markit

0%

20%

40%

60%

80%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Diesel-ICE Diesel-Electrification GAS ALT Fuel

0%

20%

40%

60%

80%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Diesel-ICE Diesel-Electrification GAS ALT Fuel

0%

20%

40%

60%

80%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 20250%

20%

40%

60%

80%

100%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

OEMs’ Powertrain Strategy – The key players

13




Engine Vol (liter) PM Reduction NOx Reduction In-cylinder

MeasuresCost/engine

(₹)Gasoline

<1.2 Optimized cat/GPF* None/EGR* Low/Mild 0 – 10k

1.2 – 2.0 Optimized cat/GPF* EGR Mild 5k – 15k

2.0 – 2.5 Optimized cat/GPF* EGR Mild 10k – 20k

>2.5 Optimized cat/GPF* EGR Mild 10k – 20k

Diesel<1.5 DPF LNT Mild 20k – 30k

1.5 – 2.0 DPF LNT/SCR Mild to Strong 30k – 50k2.0 – 2.5 DPF SCR Strong 50k – 70k2.5 – 3.0 DPF SCR Strong 70k – 100k

>3.0 DPF SCR Strong 70k – 100k

Cost Impact – IHS Estimate

OEMs’ Powertrain Strategy – Cost of BS 6 compliance

* Required for GDI engines

₹10000~$150~¥15100

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OEMs’ Powertrain Strategy – Why Maruti Suzuki continues to lead?

15


Affordability

Fuel economy

Low Running-cost

Affordable technology

Three main pillars

Fourth pillar48.6%45.9%

36.8%

47.2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2000 2002 2004 2006 2008 2010 2012 2014 2015

Market Share (LV<3.5T, Category: Cars)

CY

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OEMs’ Powertrain Strategy – Why Maruti Suzuki continues to lead?

16


Small diesel engine

AMT

Mild-hybrid

0 0.25 0.5 0.75 1 1.25

2000200120022003200420052006200720082009201020112012201320142015

Millions

Notch-back segment

Annual Sales (CY)

SwiftSwift Dzire

Celerio

Ciaz


Customer Evolution



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Consumer Evolution

18


The Petrol vs Diesel Scenario

0

0.5

1

1.5

2

2.5

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Indi

a Veh

icle

Pro

duct

ion

(mill

.)

Diesel-Electrified Diesel-ICE

0%

10%

20%

30%

40%

50%

60%

70%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

DIESEL Electricity GAS ALT

• Diesel share in PV segment will reduce to about 35% by 2020.• Correspondingly, petrol share will increase to about 60%.• Almost 40% of diesel cars will have some sort of electrification.• Pre-buy effect expected in 2019.

BS6 BS6CO2 Regulation

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Consumer Evolution – Why diesel car is losing favor?

19


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

10

20

30

40

50

60

70

80

%ag

e

INR

%age Petrol Diesel

Gap in Initial price & Fuel price

• Earlier the savings made on fuel expenditure justified higher initial price.• Diesel cars will only get more expensive post-BS6.• Subsidy on diesel fuel may never be back.

0

2

4

6

8

10

12

14

16Petrol Diesel Diesel-BS6 Petrol-BS6

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20


• Uncertainty around diesel cars.

• Vilified by National Green Tribunal (NGT).

• Judicial intervention.

• Discouraged by government.

NGT activity begins

Supreme Court bans registration of diesel vehicles >2000cc in NCR

Ban lifted with 1% additional Green Tax

2014

Dec 2015

Aug 2016

Most impact on SUVs & luxury cars.

NCR contributes to about 22-25% sales of SUVs & about 30% sales of luxury cars.

© 2016 IHS Markit


21


• Resale value affected.

• Uncertainty over future court rulings.

• More options in petrol vehicles.

377

S1GS2G

Dragon(1.2L & 1.5L)

M-SG (1.2L, 1.5L, 2.0L)KB15, K10C-GDI

New LNew K

• Mahindra to introduce petrol engines across its portfolio.

• Maruti Suzuki will introduce petrol engine in its compact-SUV, Brezza.

• Luxury makers following similar path.

• Tata and Toyota are also expected to introduce petrol engines in their UVs.

Petrol

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Consumer Evolution – Acceptability of xEVs in India?

22


BEVs

Full-Hybrids

Mild-Hybrids

BEVs

Full-Hybrids

Mild-Hybrids

BEVs

Full-Hybrids

Mild-Hybrids

Legislations

Oil price

Charging infra

Incentives

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Consumer Evolution – Success of Mild-hybrids in India

23


• Primary drivers:• FAME incentives.• Affordability.• Positive effect on TCO.• Odd-even rule in National Capital Region (NCR).• Cover from “abrupt” judicial interventions.

0 2 4 6 8 10

Oct-14Nov-14Dec-14Jan-15Feb-15Mar-15Apr-15May-15Jun-15Jul-15

Aug-15Sep-15Oct-15Nov-15Dec-15Jan-16Feb-16Mar-16Apr-16 City Ciaz

Monthly Sales

Lower tax

Customer incentive

Higher fuel economy

28.09kmpl

26.0kmpl

INR 0.9 million

INR 11.2 million

Thousands

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Consumer Evolution – Potential for Mild-hybrids in India

24


• Factors for “Best Case”:

Continuance of FAME incentives.

Legislative push.

Affordability vis-a-vis full-hybrids/BEVs.

Automakers’ focus.

Escape route for diesel cars.

00.5

11.5

22.5

33.5

4

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Base case Best case

Indi

a Veh

icle

Pro

duct

ion

(mill

ion)

© 2016 IHS Markit

Consumer Evolution – Indian customer ‘tasting’ auto-shift

25


0%

5%

10%

15%

20%

25%

0

1

2

3

4

5

6

7

8

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Manual vs Auto

Auto-shifts Manual Auto-shifts Share

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2016 2018 2020 2022 2025

AMT Automatic CVT DCT

• Affordable price.• Fuel economy at par with MTs.• Urban traffic congestion.

• Increasing ‘first-time’ drivers.• Increasing female drivers.

Indi

a Veh

icle

Pro

duct

ion

(mill

ion)

Indi

a Veh

icle

Pro

duct

ion

(mill

ion)

© 2016 IHS Markit

Consumer Evolution – Indian customer tasting auto-shift

26


0%

20%

40%

60%

80%

100%

2016 2018 2020 2022 2025

A-SegmentAMT Automatic CVT DCT

0%

20%

40%

60%

80%

100%

2016 2018 2020 2022 2025

B-SegmentAMT Automatic CVT DCT

0%

20%

40%

60%

80%

100%

2016 2018 2020 2022 2025

C-SegmentAMT Automatic CVT DCT

0%

20%

40%

60%

80%

100%

2016 2018 2020 2022 2025

D-SegmentAutomatic CVT DCT


Implementation Challenges



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Implementation Challenges – OEMsOEMs:

28


Technology upgrade

Realign Product

mix

After-treatment technology

Remain cost-

effective

Export to mature markets

Opportunity

Global OEMs Domestic OEMs

Technology Indigenize New development

Suppliers Developed New collaboration

Investment Localization New set-up

Huge opportunity for global suppliers of fuel injection systems, after-treatment devices, EGR systems, ISG systems etc.

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Implementation Challenges – Government

29


WLTCMIDC

Supply & Refill networkFinalize, Clarity & Strict implementation

Test Cycle Urea/AUS32 Ground execution

Awareness, Education, Execution

RDE – Under discussion, implementation?

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Implementation Challenges – Oil Companies

30


FCC Naphtha Hydro-treating for ULSG & Distillate Hydro-treating for ULSD.

Expand throughput capacity of existing processes.

Retrofit existing units.

Investments of about INR 40000 Cr (USD 6 billion) required.

These are “stay-in-business” type investments.

Proper mechanism needs to be in place for smooth transition from BS4 to BS 6 in 3 years.

Fuel availability across country.

© 2016 IHS Markit

Refineries & Capacities

31


Source: PPAC

Companies Capacity (MMTPA)As on 1st April 2015

IOCL 54.2HPCL 14.8BPCL 21.5

CPCL 11.5NRL, Numaligarh 3.0ONGC, Tatipaka 0.07

MRPL, Mangalore 15.0BPC, BORL-Bina 6.0

HMEL,GGSR 9.0RIL, Jamnagar 60.0EOL, Jamnagar 20.0

Total 215.1

Implementation Challenges – Oil Companies


Key takeaway


• Growth of petrol vehicles.

• Growth of auto-shift transmissions.

• Wider adoption of mild-hybrids.

• Broadening of export markets.

• Huge opportunity for component suppliers.

• Attain better airquality levels.

• Impact of price rise on sales.

• Readiness of oil companies to supply fuel.

• Political & Judicial uncertainty.

• Domestic players might struggle initially.

• Uncertainty about regulations.

• Hugeinvestments required.

Opp

ortu

nitie

sO

ppor

tuni

ties

Cha

lleng

esCha

lleng

es


Appendix


Pollutants CO HC HC + NOx NOx PM PN

Units mg/km #/kmGasoline

BS III 2300 200 - 150 - -BS IV 1000 100 - 80 - -BS V 1000 100 - 60 4.5 -BS VI 1000 100 - 60 4.5 6x10^11*

Diesel

BS III 640-950 - 560-860 500-780 0.05-0.10 -

BS IV 500 - 300 250 25 -BS V 500 - 230 180 4.5 -BS VI 500 - 170 80 4.5 6x10^11

Pollutants table

*Applicable only to GDI engines


Appendix


Incentives

Segment Incentive (₹)Level 1 Level 2

Length < 4m (P<1200cc/D<1500cc)

Strong HEV (Advanced battery)

59000 71000

Plug-in HEV (Advanced battery)

98000 118000

BEV (Advanced battery) 76000 124000

Length > 4m Strong HEV (Advanced battery)

58000 70000

Plug-in HEV (Advanced battery)

98000 118000

BEV (Advanced battery) 60000 138000


Appendix


Mild-Hybrid Strong-Hybrid PHEV

Level 1 Level 2 Level 1 Level 2 Level 1 Level 2

10% 15% 20% 30% 33% 50%

BEVs

Level 1 Level 2

70km 105km

Definition of Level1 and Level2

Fuel Economy Improvement Ratio

Electric Range

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