Economy

With BS-6 looming large, is this the right time to buy a car?

Nandana James Mumbai | Updated on October 25, 2019 Published on October 25, 2019

With the impending transition to BS-6 emission norms looming closer, the October to December period will be the right time for consumers to buy vehicles, said automobile industry experts.

Automakers are looking at liquidating their BS-4 stock by the first quarter of CY2020 (calendar year), and there seems to be no likelihood of greater discounts or a fire sale going forward, they said.

“From the consumer’s perspective, this is the best time to make a car purchase, since the discounts are at an all-time high. The same car in BS-6 version will be more expensive, and without these discounts. Even if one considers the resale value of a BS-6 car versus a BS-4 car, the current upfront discounts on buying cars now make the total cost of ownership more favourable for BS-4 cars,” said Rajesh Goel, Senior Vice President & Director, Sales and Marketing, Honda Cars India.

The automobile industry, which has been reeling under the impact of one of the worst slowdowns ever, is set to transition to BS-6 emission standards from April 1, 2020.

This transition, along with the apprehensions and confusions it has brought among customers, have been identified by most automakers as one of the primary reasons for the subdued consumer demand.

Also read: What BS-6 means for auto buyers

BusinessLine spoke to automobile industry experts to demystify the implications of the BS-6 emission norms, so that customers can make an informed decision.

Why should customers buy BS-4 vehicles and why should they buy now?

“The final quarter of CY2019, that is the October-December period, would be the best time to buy new cars as offers and discounts on BS-4 cars would be most attractive during this period. Additionally, liquidating 2019-built cars would be a priority for car makers too, which will boost the offers during this period. Come Q1 of CY2020, most car makers would have already tapered off their BS-4 stock, and would start building stocks for BS-6 compliant cars. Hence, it may not be a very good idea to delay the purchases to this period,” said Suraj Ghosh, Principal Analyst, Powertrain & Compliance Forecasts, IHS Markit.

He added that customers should be cautious too, as car makers like Maruti Suzuki have already started introducing BS-6 compliant cars, and similar offers may not remain for too long.

Eight out of Maruti’s 16 models are already BS-6 compliant, and the company has already ceased production of BS-4 cars for these models.

Hetal Gandhi, Director, CRISIL Research, and Ashish Modani, Vice-President and Co-Head, Corporate Ratings, ICRA, also said that compared to the earlier emission norm transitions, the industry is better prepared and that BS-4 inventories are expected to rationalise much earlier.

Ghosh said that most OEMs would be clearing their inventories by February or March, and that there wouldn’t be a fire sale in its actual sense. “If there’s ever a sales period with heavy discounts, then it’s going to be this quarter, particularly the last month,” he added.

“If OEMs are able to liquidate BS-4 stocks in time, we do not anticipate a significant change in discounts,” said Gandhi.

To be sure, Maruti Suzuki, the country’s largest carmaker, has also affirmed that there may not be a fire sale. “We have a very balanced inventory of BS-4 vehicles, and it doesn’t seem that there’ll be a fire sale,” said Shashank Srivastava, Executive Director, Marketing & Sales, Maruti Suzuki India Limited.

Honda Cars’ Goel pointed out that the government clarified that all BS-4 vehicles registered till March 31, 2020, will continue to be operational for the entire period of registration. “So there should not be any hesitance in buying the BS-4 vehicles,” he said.

Additionally, as diesel BS-6 passenger vehicles are expected to be costlier than their petrol counterparts, and since major PV OEMs have announced that they will discontinue the diesel variants of smaller engine vehicles (less than 1.5 litre) given the sharp price hikes, the availability of these vehicles is expected to dwindle going forward, said Gandhi. “Hence, in case a customer wishes to buy a small diesel vehicle, he will not be able to do so from FY2021 onwards.”

For instance, taking into consideration these apprehensions, Maruti Suzuki has rolled out a 5-year, 1-lakh km warranty on its four diesel-powered cars, namely Dzire, S-Cross, Swift and Vitara Brezza.

Why should customers buy BS-6 vehicles?

CRISIL’s Gandhi said that BS-6 vehicles will be less polluting due to the addition of various exhaust management components. ICRA’s Modani said that if customers are conscious about the environment, they will be opting for BS-6 vehicles.

“I do not see any particular reason for waiting to purchase a BS-6 vehicle, as most offers would end by then, apart from the fact that BS-6 compliant cars are expected to be pricier,” said IHS Markit’s Ghosh.

CRISIL said that the expected price hike would be in the range of 4-5 per cent for petrol passenger vehicles, and 7-9 per cent for diesel passenger vehicles as well as two-wheelers. Gandhi said that from a customer’s point of view, the difference in the performance of a BS-4 and BS-6 vehicle is negligible.

What are some of the technical details customers should know about the BS-6 transition?

Gandhi said that passenger vehicles with larger diesel engines (greater than 2 litres) are expected to have an additional ad-blue tank which is used to treat NOx or nitrogen oxides, before it comes out of the exhaust pipe.

“The ad-blue tank will contain and aqueous urea solution, which is a reducing agent to treat NOx. Customers will need to periodically fill the ad-blue tank at pre-specified intervals along with the fuel. This would add to the operation cost of running a vehicle,” she added.

For customers, there won’t be any behavioural change required when a BS-4 or BS-6 car runs on a BS-6 fuel, said Ghosh. “But, in the BS-6 regime, if a BS-6 diesel car is somehow regularly running on BS-4 or lower grade fuel — which is highly unlikely as BS-4 fuel may not be available any more — it might hamper the functioning of the engine,” he cautioned.

This is because the sulphur content is reducing in the BS-6 fuel. The main difference between a BS-4 and a BS-6 fuel is the sulphur content, its limit being 10 ppm in BS-6, compared to 50 ppm in BS-4, he said.

“What it means is that BS-6 engines are designed to run on low-sulphur fuel, so if it exceeds the limit, then normal functioning — fuel injection, exhausts, combustion characteristics, emission control devices etc — gets affected. The effects are more pronounced in diesel engines, and quite low in petrol engines,” he explained.

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Published on October 25, 2019
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