How OEMs in India adapt to harsher emissions norms

The implementation of Bharat Standard level 6 or BS6 in April 2020 was a big automotive game changer in India, but it hasn't stopped there

Patcharaphon Wongwetsawat, Senior Analyst

22 August 2022

The implementation of Bharat Standard level 6 or BS6 in April 2020 was a big automotive game changer in India, forcing OEMs to either upgrade or phase out their aged powertrains. But the milestones in the roadmap of emission control tightening don’t end with BS6. In April 2022 the federal government implemented the Corporate Average Fuel Efficiency (CAFE) norm phase 2 and will implement the Real Driving Emissions (RDE) or BS6 stage 2 standard in April 2023. This will be even more challenging for the sector.

In April 2022, the passenger vehicle CAFE norm target was reduced by 13% from 130 g/km to 113 g/km. It meant that all OEMs must achieve better fuel efficiency in order to lower their fleet’s corporate average CO2 level. Moreover, the introduction of RDE next year will bring additional difficulties since the new testing procedure will require not only existing laboratory procedures but also real-world driving, the results of which will be included in the overall assessment.

Apart from upgrading powertrains, 4 key features will provide special benefits in the calculation of CO2 emissions. These are start/stop functions, tyre pressure monitoring systems (TPMS), regenerative braking systems, and 6 or more speeds within transmissions. Fitment of each feature can result in a reduction factor of 0.98 which is a multiplication input into the final CO2 value of the vehicle.

What impact will these measures have on India’s automotive scenarios?

Start/Stop and TPMS are likely to become widely fitted items for mass-market vehicles as they already are in developed car markets. We envisage these items being fitted as standard equipment in many models. The CO2 reduction factor of 0.98 x 0.98 will be included if a vehicle is equipped with both features.

A regenerative braking system normally comes with hybridization, from micro-hybrid or mild hybrid upwards. Whether 48V or not, both will also qualify for the same CO2 reduction factor of 0.98. This feature is expected to be introduced in many key models.

The 6-speed transmission category is not just limited to the manual transmission sector but applies to any vehicle that is fitted with any transmission type that can identify for 6 or more gear ratios (apart from reverse). The CO2 value of that vehicle can be adjusted by the 0.98 factor also. Thus, many ICE models are expected to upgrade their transmissions soon with the ubiquitous 5-speed transmission segment (all types) tending to decrease while we will see the growth of 6-speed transmissions and xEVs.

OEMs have already started the process of preparing for the new norms. For example, the 2022 Suzuki XL-6 top variant comes with start/stop, TPMS, micro-hybrid, and 6AT which means it can get the full CO2 reduction factor of 0.98 x 0.98 x 0.98 x 0.98.

What about xEVs in India?

Alongside the existing xEV push by the government, especially for BEVs, the CAFE norm also provides the advantage of ‘super credits’ accruing from the numbers of FHEVs, PHEVs and BEVs sold locally. A single sale of FHEV, PHEV, or BEV will be counted in the OEM’s fleet calculation as 2, 2.5, or 3 units respectively. Notably, one BEV sold will account for three extremely low CO2 vehicles. Therefore, the selling of more xEVs is a shortcut for OEMs to slash the entire fleet corporate average CO2 value. This approach has been seen in other markets and tends to be effective at enabling the transition from ICE to xEV.

There are two approaches OEMs are taking in responding to the stricter norms. Local OEMs like Tata Motors and Mahindra along with Korean OEM, Hyundai, are betting on BEV. With a lot of BEVs in the pipeline, we anticipate seeing significant growth within the short-to-medium term.  On the other hand, Japanese OEMs like Suzuki, Toyota, and Honda are expected to take a different strategy by betting on FHEV in the short term, due to their slow BEV adoption plans. In particular, India’s top-selling OEM, Suzuki has decided to launch its first FHEV on the Grand Vitara together with its sister model, the Toyota Urban Cruiser Hyryder, this year. Nevertheless, Japanese OEMs are expected to enter the BEV space in the long run.

We are expecting that passenger BEV share of production will soar to over 10% towards the end of this decade. In the meantime, PHEV and FHEV production will stay at around 3% at most because of high selling prices and fewer tax benefits.