Improved Indian Emission Standards Blamed For Commercial Truck Price Increases

INDIA – CHINA – Truck manufacturers have never had to struggle to explain the rising costs of a new rig. One must have some sympathy now however as noxious emission levels continue to fall as legislation to prevent vehicle pollution starts to bite across the world. There is often a perception in the West that many Asian countries are dragging their feet over emission standards. Simple facts prove this not to be the case. With lobbying and discussion groups such as the Clean Air for Asian Cities movement this year sees China adopting the stringent Euro Stage IV vehicle emission standard across the country after introducing it into Beijing in January 2008 in preparation for the Olympics that August.

In India this week Tata Motors announced a 2% rise in commercial vehicle prices which it attributes directly to the need to conform to the new emission standards. For both trucks and 4 wheeled vehicles raising tailpipe standards for the subcontinent has progressed rapidly. The first standard, India 2000, (equivalent to Euro 1) for smaller vehicles was introduced nationwide that year. There followed a gradual introduction of Bharat Stage II (Euro 2) into 10 major cities in April 2003 and nationwide 2 years later at which time Bharat Stage III (Euro 3)was introduced, once again into the 10 cities. Now this standard will go nationwide in April when, as in previous years, Bharat Stage IV (Euro 4) will become law in the 10 trial cities which include Mumbai, Kolkata and Chennai.

Permitted levels of pollution for light and heavy diesel trucks are slightly different but broadly follow the same time and standards lines and lorry manufacturers claim they have extra costs due to the April imposition of the new rules which they need to pass on to customers. A comparison of Indian and US standards for small diesels demonstrates that the Americans in fact lag behind other countries in their willingness to adopt the cleaner air legislation, presenting a disjointed argument for and against the need for regulation in different States.

After India introduced last months anti dumping laws for cheap tyre imports, principally from China, it seems the truck manufacturers are also having to slow production by as much as 20%. Tyres are in short supply as the truck makers’ use up existing stocks and seek to replenish them as cheaply as possible as these too are a factor in higher manufacturing costs. Despite these drawbacks truck producers say that the market remains healthy with higher truck sales figures again this month for new vehicles (Society of Indian Automobile Manufacturers). This is in part due to the continuing financial stimulus package introduced by the Government and, even in the face of rising interest rates and the possibility of stimulus withdrawal there appears to be confidence in the future of the market.

With several major international truck makers having extended their interests in India in the past few months and the Bank of India rumoured to be looking for a large share of the Tata Motors Finance business once again the country presents itself as a land of some opportunities for the commercial vehicle sector.