Mumbai: Implementation of BS-VI emission norms along with new safety norms may push up vehicle costs by up to 20 percent but OEMs are unlikely to pass on the increased cost to customers due to subdued market conditions, says a report.
While some of new safety norms have already come into effect from this April, and the remaining ones will be in force from next months, the new emission norms are to be implemented from next April.
“Manufacturing cost is expected to increase by about 12-15 percent for passenger vehicles and about 15-20 percent for commercial vehicles due to BS-VI emission norms along with the new safety norms,” Care ratings said in a note Thursday.
However, the original equipment manufacturers (OEMs) may not be able to pass on this cost burden immediately on account of subdued market conditions, the agency noted.
Vehicle sales across categories registered a decline of 8.62 percent to 20,86,358 units in May from 22,83,262 units a year ago with passenger vehicle seeing the steepest decline in nearly 18 years, dropping over 20 percent in the month, amid continued weakness in retail offtakes, according to Society of Indian Automobile Manufacturers data.
According to Care, commercial vehicles sales declined over 14 percent in the month with medium and heavy commercial vehicles sales declining by about 25 percent and light commercial vehicles volumes declining by about 7.6 percent.
Three-wheeler sales declined by about 10 percent while two-wheelers volumes dipped 5.4 percent in the month.
“Demand was under pressure due to high interest rates and higher insurance cost,” it said.
Care expects demand to pick up later on the back of new launches along with expected pre-buying in the second half on account of BS VI emission norms.
The ongoing liquidity crisis in NBFCs has been one of the major contributors of poor sales and the same is expected to remain continue in the first half, it said.
Also, the recent government move to increase the load carrying capacity from 16.5 tonne to 18.2 tonne can weigh on CV demand.
