Car prices may go up 15-20% on revised fuel efficiency norms

Roudra Bhattacharya New Delhi | Updated on September 19, 2012

Praful Patel to write to Power Minister on industry’s position

Small-car prices could rise by Rs 50,000, while larger cars could see a Rs 1.2-lakh increase in order to meet the “unachievable” fuel efficiency norms set out in the revised Bureau of Energy Efficiency (BEE) proposal.

Officials from the auto industry and the Ministry of Heavy Industries said that, in all, prices may have to be hiked by 15-20 per cent for the industry to recover its significant investments in new technology and setting up manufacturing capacities.

The BEE, which will, in April 2013, unveil a fuel-efficiency labelling system based on a five-star rating system, had also announced fuel efficiency regulations for carmakers in May 2011. However, after public consultations, pressure from the environmental lobby and approval from the Prime Ministers’ Office, the benchmark has been made more stringent this year, Government sources said.

“The industry had been supporting and collaborating on the norms. Earlier, the targets were ambitious, as most companies were already above the line. But now they seem to be unachievable,” said Vishnu Mathur, Director-General, Society of Indian Automobile Manufacturers.

Auto sector concerns

Praful Patel, Minister for Heavy Industries, is expected to write to the Power Minister, Veerappa Moily, this week, explaining the concerns of the auto industry.

A borrowed concept from Europe’s Corporate Average Fuel Economy (CAFE) standards, the idea is that a carmaker will have to meet a fuel efficiency target set as per the average weight across its entire fleet. So, a utility vehicle maker such as Mahindra will have a lower fuel efficiency target, than small-car maker Maruti Suzuki.

In 2011, the BEE had said that the country’s entire car fleet would have to meet the target of 138 CO{-2} gm/km (17.2 km/litre) by 2015, and 128 CO{-2} gm/km by 2020. However, a few months back it sharply reduced these reference points to 129 gm/km by 2015 and 113 gm/km by 2020, which would mean higher fuel efficiency.

This target is stiff, said Mathur, considering that, at present, the entire car fleet has a fuel economy of 142 CO{-2}gm/km (based on average weight of 1,032 kg). “Most companies are over the line. Currently, only three companies meet these norms, and they are the smaller players,” he said.


To meet the BEE’s overall industry benchmark, each carmaker will get an individual target based on the weight of its fleet.

Those that fail to meet the target will be penalised Rs 10 lakh and an additional Rs 10,000 per day.


Published on September 19, 2012

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