Mumbai, April 2017 - The Indian automotive industry's movement towards Bharat Stage (BS) VI compliance will have far-reaching implications for original equipment manufacturers (OEMs), especially in the diesel engine segment. The regulations governing diesel engines are expected to become tighter, and the cost of compliance will be up to USD 1,200 for diesel cars. In this scenario, OEMs that offer a combination of solutions with substantial cost benefits will be the most successful. The mild hybrid electric vehicle (MHEV), with its exceptional cost advantage, could be that solution. By helping diesel engines balance cost efficiency and BS VI compliance, this powertrain segment could well capture almost 18 per cent of the total market in 2023.

"Mild hybrid technology will disrupt the automotive industry with its unique value proposition of helping OEMs adhere to the fuel economy standards," said Sudeep Kaippalli, Industry Analyst, Mobility Practice, Frost & Sullivan. "Various OEMs, especially Maruti Suzuki and Mahindra & Mahindra, are intensifying focus on MHEVs due to their ability to improve fuel efficiency and make the cars more economical to own over the course of its ownership. For instance, the new Ertiga from Maruti Suzuki that features SHVS technology pushes up its fuel efficiency from about 20.8 km/l to 24.5 km/l. The recent withdrawal of incentives under FAME (Faster Adoption and Manufacturing of Electric Vehicles) is not expected to have a significant impact in the sales of mild hybrid vehicles as it comes with a strong cost of ownership advantage that renders the incentive relatively insignificant. For the same reason, several OEMs are already deciding on the electrification strategies to create the right hybrid product mix for India. Full hybrids also will find sizeable uptake in the long term after a slow start."

BS VI compliance requirements have opened up opportunities for OEMs to enhance battery technology as well as the valve trains in terms of friction reduction, flexibility, and being an enabler of advanced combustion technologies. However, this new standard has also challenged suppliers to align the supply chain in a way that least affects the vehicle cost.

The even bigger challenge for suppliers will be to prepare the supply chain for after-treatment solutions and still keep the costs competitive. As almost all OEMs and global suppliers have strong capabilities in diesel exhaust after-treatment, pricing will be a key differentiator.

"The cost of compliance will be high in diesel engines due to the need for expensive after treatment technologies such as Selective Catalytic Reduction (SCR) even in smaller engines," noted Kaippalli. "Petrol engines, on the other hand, will use improved combustion, injection and other technologies for compliance, simultaneously making significant advances in fuel efficiency and power output as well."