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© 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
© 2016 IHS Markit 3
Introduction
Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 8861077100, [email protected]
BS 6 & CO2 Regulations / October 2016
© 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
© 2016 IHS Markit
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
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
FAME
6
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
FAME
7
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 8
Background
Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 8861077100, [email protected]
BS 6 & CO2 Regulations / October 2016
© 2016 IHS Markit
Background
9
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 10
OEMs’ Powertrain Strategy
Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 8861077100, [email protected]
BS 6 & CO2 Regulations / October 2016
© 2016 IHS Markit
OEMs’ Powertrain Strategy - Steps
11
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
0%10%20%30%40%50%60%70%
2016 2018 2020 2022 2025
Auto-shift Electrification GDI
OEMs’ Powertrain Strategy – The key players
12
Automotive Conference – Tokyo | October 2016
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
Automotive Conference – Tokyo | October 2016
© 2016 IHS Markit 14
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
OEMs’ Powertrain Strategy – Why Maruti Suzuki continues to lead?
15
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
OEMs’ Powertrain Strategy – Why Maruti Suzuki continues to lead?
16
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 17
Customer Evolution
Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 8861077100, [email protected]
BS 6 & CO2 Regulations / October 2016
© 2016 IHS Markit
Consumer Evolution
18
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
Consumer Evolution – Why diesel car is losing favor?
19
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit
Consumer Evolution – Why diesel car is losing favor?
20
Automotive Conference – Tokyo | October 2016
• 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
Consumer Evolution – Why diesel car is losing favor?
21
Automotive Conference – Tokyo | October 2016
• 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
© 2016 IHS Markit
Consumer Evolution – Acceptability of xEVs in India?
22
Automotive Conference – Tokyo | October 2016
BEVs
Full-Hybrids
Mild-Hybrids
BEVs
Full-Hybrids
Mild-Hybrids
BEVs
Full-Hybrids
Mild-Hybrids
Legislations
Oil price
Charging infra
Incentives
© 2016 IHS Markit
Consumer Evolution – Success of Mild-hybrids in India
23
Automotive Conference – Tokyo | October 2016
• 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
© 2016 IHS Markit
Consumer Evolution – Potential for Mild-hybrids in India
24
Automotive Conference – Tokyo | October 2016
• 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
Automotive Conference – Tokyo | October 2016
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
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 27
Implementation Challenges
Suraj Ghosh, Manager, South Asia Powertrain Forecasts, +91 8861077100, [email protected]
BS 6 & CO2 Regulations / October 2016
© 2016 IHS Markit
Implementation Challenges – OEMsOEMs:
28
Automotive Conference – Tokyo | October 2016
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.
© 2016 IHS Markit
Implementation Challenges – Government
29
Automotive Conference – Tokyo | October 2016
WLTCMIDC
Supply & Refill networkFinalize, Clarity & Strict implementation
Test Cycle Urea/AUS32 Ground execution
Awareness, Education, Execution
RDE – Under discussion, implementation?
© 2016 IHS Markit
Implementation Challenges – Oil Companies
30
Automotive Conference – Tokyo | October 2016
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
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 32
Key takeaway
Automotive Conference – Tokyo | October 2016
• 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
© 2016 IHS Markit 33
Appendix
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 34
Appendix
Automotive Conference – Tokyo | October 2016
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
© 2016 IHS Markit 35
Appendix
Automotive Conference – Tokyo | October 2016
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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