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Germany’s diesel ban diktat is bad news for the fuel

Murali Gopalan | Updated on: Mar 01, 2018
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Other European countries could follow suit in due course of time

It was earlier this week when a Leipzig court decreed that all German cities would now have the right to ban diesel cars. This will have tremendous implications not only for automakers, which will now have to tread extra carefully from now, but also strengthen the anti-diesel lobby across the world.

It is astonishing to think how diesel has rapidly become the villain of the piece in a span of just two years since the Volkswagen emissions scam first hit the headlines in 2015. Even as the company went into overdrive setting its house in order and coughing up huge penalties, this incident was enough to arouse a lot of anger against diesel.

The latest ruling in Germany, home to big brands such as VW, BMW and Mercedes-Benz, is no trivial matter since it has the potential to gather momentum in other parts of Europe. It could only be a matter of time before big cities such as London, Paris, Rome and Berlin decide to banish the fuel from their roads. How this will impact its manufacturers is the million dollar question.

Of course, the silver lining in the cloud is that any transition will take time and it is not as if all German cities will decide en masse to put the brakes on diesel. However, the message is loud and clear: diesel is on the back foot in Europe. Beyond impacting carmakers, the entire supply chain of vendors and dealers will also wilt as a result once this happens.

Look beyond Europe

The only option, in this case, would be for manufacturers to look beyond Europe to other nations in order to safeguard their diesel business. It is in this context that India could emerge a potential destination.

The country is now in the midst of a massive cleanup exercise with its vehicular emissions and will move to BS VI norms in April 2020. Automakers are gearing up for this huge exercise. The challenge is to keep costs in check since India is also among the most price-sensitive markets in the world.

According to an auto analyst in Germany, the scaling down of diesel in Europe could open up business opportunities for automakers in India. “After all, the country has embarked upon a clean air drive and local Indian players can drive a hard bargain in sourcing diesel engine technology from Europe,” he says.

At one point in time, India was going all out to promote a 100 per cent electric automotive ecosystem by 2030 but recently decided to drop this plan. Clearly, it was an impossible task given that it will call for charging infrastructure across the length and breadth of the country along with affordable batteries and generous fiscal subsidies.

With the policy now put on the back burner, it is reasonably clear now that the first priority will be to ready BS VI petrol and diesel over the next two years. Automakers like Toyota, in their turn, will focus on hybrids and electric with, perhaps, hydrogen to follow if supporting infrastructure is in place.

What the Leipzig ruling has also shown is that legislation will drive change and gone are the days when automakers decided what was best for the customer. Today, the green lobby across the world is powerful and can prevail upon governments to choose the appropriate fuel solution.

In the process, this can lead to unpredictable situations as evident in India where 2,000cc diesel cars was banned in Delhi for a good part of 2016. Last year, the Supreme Court directed manufacturers to liquidate their BS III stocks in less than four days when they least expected such a judgment.

Automakers now realise that they need to be more vigilant about legal intervention, especially when the environment has become such a hot topic of discussion. China, meanwhile, is marching on towards a robust electric vehicle ecosystem in its bid to clean up the air.

Published on March 01, 2018

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