Industry needs clear roadmap for biofuel, rationalised taxes: Vishnu Mathur

Sopan Joshi | January 28, 2015




Why is fuel economy so crucial in India’s automobile market?

We are a price conscious society. Till about 50 years ago, we were a deprived society. We have not yet become a conspicuous consuming society like some developed countries. Traditionally, the Indian society has not been a mindless consumer, we have always been mindful consumers. Wasting is looked down. You can easily find parents telling children: “Don’t leave food on your plate, please finish it.” Why? This has been the upbringing for centuries. We are also highly conscious of the cost that we have to incur. Transport fits into this equation very well. Why else are small cars still 70 percent of our market? Why else do two-wheelers still account for a bulk of our transportation? Simply because high fuel efficiency reduces the cost of our transportation, the cost of running the vehicle.

Do you see this changing?

I think it will remain like this for a very long period of time as the Indian consuming society goes up the income ladder. And you already see them migrating to bigger vehicles as performance and luxury become more important than fuel economy for some. It will continue to happen at a slow pace. I say slow pace because our per capita income is not going to zoom within a few years. The bulk of our population will still be in the middle class and the lower middle class, who have a need for mobility, but cannot afford luxury.
 
Isn’t that why diesel cars sell more? Costly SUVs on cheap fuel?

It’s not just because diesel is cheaper. There are countries where the cost of diesel is equal to the cost of petrol. In the US or European countries, the cost of diesel is equal to the cost of petrol. One reason diesel vehicles sell more is the greater mileage diesel offers. SUV is a hold-all term in India. Regardless of whether it offers sports or utility features, any kind of crossover vehicle gets labelled SUV. Because that category has aspirational value. If you consider the international harmonised classification, there is no standard definition of an SUV. Left to me, I’d say only four-wheel-drive vehicles should be classified SUVs. We at SIAM have been asking our industry members to define an SUV.

What is the industry doing to make more fuel efficient vehicles?


India’s vehicle fleet is, by far, the most fuel efficient. About 70 percent of our vehicles are stripped-downed versions with low engine capacity. By international norms, you will call them under-powered. But they are basically meant for mobility, not for high performance. In Europe, by comparison, you will not find a small car with an engine capacity of 1,000 cc; you are unlikely to find engines smaller than 1,400 cc. In India, the market drives fuel efficiency. So manufacturers compete to sell the most fuel-efficient vehicles. We have a car here with a 676 cc engine. It’s a typically Indian, frugal engineering concept, it does not exist anywhere else in the world. Customer attention towards performance is increasing, but fuel efficiency is still the top priority in our market.

Any examples of this?


A typical customer’s first car would be an entry-level or any other small car. But when he buys a second car, he is likely to desire better acceleration and air-conditioning, which you cannot get out of a small, frugal engine. So he will look for a car with better performance. That is aspiration: moving to a better car. The third car he buys may not be one with a small engine. It could be a mid-size sedan as his purchasing power has improved.
 
The motorcycle market works somewhat differently. People typically do not go in for a second motorcycle or a third motorcycle. They move to four-wheelers. A motorcycle or a two-wheeler of any kind is usually a short-term solution. The moment you get married or have a family, a kid or two, you want to move to a four-wheeler because it is safer.

What is the industry’s response to the demand for fuel efficiency?


The fuel economy is determined by number of reasons. One, the vehicle’s weight; two, the engine technology; three, driving practices, and then there are others. Our cars are very light, and with increasing safety features, they will only get heavier, but composite materials can still help reduce the weight. Engine technology upgrades every two to three years, generally. Fuel efficiency is not a curve; it increases in steps, because you cannot make technical changes to a vehicle model every day. It’s not like if you are making a particular car today, tomorrow you will make something completely different. For a period of time, the same technology will be used. During this time, a new engine is being developed. When that is complete, a new model comes out. Then this model sells for, some time, till the cycle gets repeated.
 
In India, the first leap was the coming of Maruti, wasn’t it?

When Maruti came in the 1980s, it was a technology jump. Before that the Ambassadors and the Premier Padminis gave about 10-11 km to a litre of petrol. Maruti 800 had a high-speed engine that gave about 15 km to a litre. One component of improving engine technology is to reduce friction. How do you do that? One way is to improve the coating of the engine part. A higher engine compression ratio is another. All this requires a step jump. Take the example of Tata Indica, which used to give about 20km to a litre when it was launched. With the V2 version, this increased to 26km to a litre. So, if I say I will improve my fuel efficiency 2 percent every other year, it doesn’t mean that there will be a 1 percent improvement next year. But, by 2030, I will be able to deliver a 10 percent gain.
 
You grew up in Delhi. How do you see air pollution from vehicles?


I have a slightly different view than what is being put up by the media today. I have seen terrible days of smog when I was a young boy, growing up in Delhi. I don’t think that we have become 10 times worse than yesterday. There is definitely a change. The population of Delhi has increased. So the same goes for vehicles, for industries, for diesel power generator sets. I don’t remember, from my younger days, anybody hiding a diesel genset to run an air-conditioner at home. Today, I see many people doing that. The extent of population increase in Delhi has contributed to the air pollution.

Coming specifically to the auto industry, between 2005 and 2010, Europe was following the Euro IV norms. In 2010, we moved to BS IV norms, which are equivalent to Euro IV. I have been travelling to Europe for decades. Their car population is two-and-a-half to three-and-a-half times what we have. The land area and overall population of their major cities is not that much different from our major cities. Yet we experience the kind of foul air quality they do not face. Why? I have asked this question of every expert I have met. I have not got an answer. There are many other factors which play a role and this issue can only be addressed holistically.

From my experience of Europe, it also has to do with better public transport there. They don’t use cars all the time. They don’t use them as much as a vehicle is used in Delhi. If I want to ride the Metro to my office, the last-mile connectivity is poor.

Even so, the number of vehicles registered in Delhi does not give an accurate picture of the number of vehicles used. A study by IIT-Delhi showed a sizeable number of vehicles in Delhi are not used on a daily basis. So the cars are not emitting exhaust all the time. The reality is that an average car in use will move 15-20 km a day. It is extremely difficult to calculate the real contribution of vehicular exhaust in air pollution. The only official ‘source apportionment study’ on air pollution in Delhi was conducted by the Central Pollution Control Board, and it said that transport contributes only about 7 percent of the air pollution in Delhi. The entire transport sector!

While all vehicles sold in Delhi have to comply with BS IV emission norms, that does not prevent older vehicles with dated emissions norms from plying on the roads. We have a huge population of old vehicles; our total vehicle fleet is one of the oldest in the world. In our society, we don’t like to throw away things. Typically, people tend to sell vehicles the moment they are six-seven years old. Older vehicles are sold off from cities to suburban areas, but they continue to enter the cities.
 
What do you suggest people do with older vehicles?

The long-term solution is to institute a strong and robust inspection and certification (I&C) system of periodic roadworthiness checks which will take time. In the robust I&C  system,  have an incentive-based policy for vehicle replacement. Owners should get an incentive if they scrap their old vehicle; and incentive that can be used to buy a comparable vehicle with a better engine that meets current emission norms. Scrapping older vehicles is important not only for the sake of environment. Newer vehicles are far more fuel efficient; they are safer, too. The benefits are huge. We should prioritise the modernisation of our vehicle fleet by giving an incentive.

Doesn’t public transport undermine the car market?


Who makes buses and trucks and taxis and auto-rickshaws? Automobile manufacturers. I do not think there is any antagonism within the industry between public and private transport. Public policy should not be about whether more cars should get sold or more buses. The objective of any policy ought to be encouraging mobility, whether it is by creating public transport or selling buses or selling cars. Ultimately, it has to create the conditions that offer safe, reliable and affordable mobility options.

Are e-rickshaw manufacturers part of your ambit?

No. E-rickshaw manufacturers, for the time being, are more at the scale of a cottage industry. Hopefully, with some basic redoing on safety norms, some organised manufacturers will improve their quality and scale up, achieve conformity of production.

Maruti Swift and Datsun Go failed the NCAP safety test. What was that about?

We have something called the CMVR (central motor vehicles regulations). They regulate only two aspects: vehicular emissions and safety. From 2000-10 it was the decade of emission control, during which we improved our vehicular emissions far faster than what Europe had done. From 2005 onwards, it has been a decade of safety, especially since we had joined the UNECE world forum for harmonisation of vehicle regulations (WP-29). Like emissions regulations, safety norms cannot be implemented overnight. You need long-term roadmap. This takes a long time for R&D, testing, homologation, etc., to implement and make safer vehicles available in the market. We have a clear roadmap on vehicular safety that has been laid down by stakeholders, including the government, based on the priorities for our country. After that, you need to have testing facilities. And then you say I’m going to give the industry so many years to meet these norms, by which times they will become mandatory. The CMVR has 60 mandatory safety regulations right now. The NCAP test you mentioned is beyond those. None of the manufacturers claimed that their vehicles were built to clear those tests. So the controversy was pointless, as there was no violation. As for raising the safety performance of our cars, our regulations (to meet the kind of test NCAP carried out) have been ready for more than three years. The government has not enforced it because seven testing facilities under the NATRIP scheme are under varying stages of construction. When the facilities are up, each car model will have to meet the regulations. The roadmap is already in place.

Why do we read so many reports of cars going up in flames?


We have investigated such cases; some car companies formed committees to look into such cases. The main cause of such fires is short-circuit in the electrical wiring. What we find is that customers tend to go to the open market to install aftermarket features in their cars, mostly entertainment gizmos like high-wattage amplifiers. These consume power at a rate the vehicle’s electrical circuit is not designed to bear. Secondly, the aftermarket products are installed in a way that exposes the wiring. The second major cause is wrongful installation of an aftermarket CNG kit or an LPG cylinder. Then there are some other reasons, too. In one case, the car was parked on top of a heap of smouldering leaves. In another, the car was parked in contact with exposed live wires. Several cases have to do with drivers pilfering fuel from the vehicles and not closing the fuel cap properly.

How do you see alternatives fuels?

They are promising, but they need clear policy decisions. For one, there is always a debate whether we should move into that kind of technology in a country where we have shortage of food. Having said that, there is enough ethanol in our country. Yet, we have not managed to create an ethanol economy. Brazil, in contrast, took a clear decision to adopt multiple fuels. Which means they blend normal petrol with ethanol and allow people to decide which fuel is better for their requirement. The vehicles there are designed to accept various ranges of ethanol blending. There are technical issues with ethanol, but they are not insurmountable. The average petrol vehicle can accept only 5-10 percent ethanol blending (the newer vehicles, not the older ones).

If you increase the proportion of ethanol from there, you need to design the vehicle specific to that, because ethanol can be quite corrosive to parts like rubber parts, and has a lower calorific value than petrol. So, if you design and finetune the engine to perform with a certain amount of ethanol to get optimum performance, if you change the fuel mixture therein, you get sub-optimum performance. We have started talking about 85 percent ethanol blending. It can certainly be done. But if manufacturers are to make vehicles for that kind of fuel, then such vehicles will run only in places where that particular fuel is available. So, for example, you may not be able to drive from Delhi to Shimla because your fuel may not be available. So, if we are to go the Brazil way, the political leadership needs to take a  decision and declare it, so that the industry can have a clear roadmap that cannot be changed once the investments have been made.

What limits electric vehicles?


There are several variations of EVs. There are hybrids of varying types and then there are fully electric vehicles. The battery cost is the biggest hindrance. For each kilowatt of battery, the international cost is about $600-700 (about '37,500-43,750). To make a strong hybrid or a fully electric vehicle, you need about 20 kilowatt (so the battery cost is '7.5-8.5 lakh). Then there is the battery technology itself; developers and manufacturers are in Japan and Europe. We are late entrants. Now, a serious effort is being made with the national mission on electric mobility. This initiative needs quick government approval and allocation of resources.

What are your expectations from the upcoming budget?

In our country, vehicles and mobility are seen as conspicuous consumption. The automobile industry and the mobility sector as such is highly taxed. There is a variety of state-level taxation that makes mobility across state boundaries terribly cumbersome and restrictive. A taxi registered in Delhi cannot cross Delhi border. Inter-state mobility is therefore hampered. We hope the taxes are rationalised in a way that they promote mobility, not put disincentives on mobility.

feedback@governancenow.com

(The interview appeared in January 16-31, 2015, issue)

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