Fuel consumption of new passenger cars in India: Manufacturers’ performance in fiscal year 2018–19
Atmanirbhar Bharat and COVID-19: Fuel consumption standards aren’t a problem, they’re part of the solution
The recent COVID-19 lockdown in India forced the automobile industry to shut manufacturing plants and sales have suffered mightily in recent months. The story is similar across all major vehicle markets. To help, France, Germany, and Spain have all announced government stimulus programs. It’s not surprising that a supporting economic stimulus package from the Government of India is also being discussed, and as part of this, Indian automakers have suggested that corporate average fuel consumption (CAFC) standards for passenger vehicles be delayed by at least one year.
But what would relaxing the standards accomplish? And what would the environmental impacts mean for India’s national goals regarding climate change and energy independence?
First, let’s look at whether manufacturers have been struggling to meet the standards thus far. The first phase of the CAFC norms for passenger vehicles began in fiscal year (FY) 2017–18, and manufacturers complied that year with a margin of about 9% with respect to the target. More stringent norms are set to take effect at the start of FY 2022–23, and these require reducing the fleet average fuel consumption/CO2 emissions of passenger vehicles by another 13% compared with those from FY 2017–18. Our recent analysis found that the new passenger vehicle fleet will need to reduce CO2 emissions by only 9.8% in the next four years, or about 2.55% annually from the current level, considering manufacturers complied with the norms with a margin of about 8% in FY 2018–19.
Most manufacturers are already on track. They’ve adopted technologies such as lightweighting, higher engine efficiency, low-resistance tires, and aerodynamics to improve fuel efficiency. For example, Maruti Suzuki’s Dzire, which claimed 19.1 kilometers per liter (kmpl) prior to the onset of CAFC norms, now claims 23.3 kmpl in FY 2019–20. This is a phenomenal jump in efficiency and is the result of curb weight reduction of approximately 11%, improved combustion efficiency, low viscosity engine oils like 0W16, and the inclusion of idle start-stop.
Manufacturers are also making good use of credits from flexibility mechanisms. These apply to things including 6-speed transmission, regenerative braking, idle start-stop, and tire pressure monitoring systems. The overall share of 6-speed transmissions in the fleet of new vehicles sold increased from 15% in FY 2017–18 to 18.8% in FY 2018–19, and it resulted in an overall industry fleet average reduction of approximately 0.5 grams(g)/km of CO2. Start-stop and regenerative braking are slated to become omnipresent owing to benefits gained both on the test cycle and through the off-cycle credits. Mahindra is adopting these technologies in every model ranging from the smaller KUV100 to the bulkier Bolero and TUV300. Start-stop and regenerative braking can reduce fuel consumption by another 9%, and that will cover a substantial distance toward meeting the CAFC target.
There’s more. With the advent of Bharat Stage VI pollutant emission standards, diesel vehicles have to be fitted with expensive aftertreatment systems that increase their upfront purchase price considerably. Anticipating a change in customer preference in favor of cheaper gasoline variants, many car manufacturers are investing in emerging technologies that are specific to gasoline. One such technology is turbocharged gasoline direct injection (GDI), which provides a fuel efficiency improvement of approximately 6%. In FY 2019–20, Hyundai sold more 1-liter turbocharged GDI versions of its Venue model than it did diesel versions.
Still, in order to bridge the remaining gap with the FY 2022–23 target, manufacturers will have to deploy hybrids and battery electric vehicles. Mahindra and Tata Motors have already introduced a few electric cars and sales have helped both companies meet their FY 2018–19 CAFC targets. At the same time, the Government of India has set favorable policies in terms of taxes and incentives to propel the growth of the market for such vehicles. By rough estimates, even a 10% penetration of the mild hybrid technology could give an industry average benefit of 1%, and an electric vehicle (EV) with 1% market share can give an overall benefit of 2.25%, which is inclusive of the super-credit benefits currently given to EVs. This also means that just a 4% penetration of EVs is sufficient to meet the FY 2022–23 CAFC standard without any improvement in internal combustion engine (ICE) vehicle efficiency.
Taken as a whole, we see there are many ways to achieve the FY 2022–23 standards in the original timeframe. And while a delay wouldn’t directly generate a sharp increase in vehicle sales, it would tend to slow the uptake of new technologies, and cars sold during the extra year would be higher emitting on average. Given this, let’s look at the impact a one-year delay could have on oil imports and greenhouse gas (GHG) emissions.
Five years ago, Prime Minister Narendra Modi set a target of reducing India’s dependence on imported oil from 77% in 2013 to 67% in 2022. With oil consumption increasing at a brisk pace due to a vehicle fleet that grew exponentially in recent decades, and in the context of stagnant domestic oil production, achieving this target will be difficult. With 41% of India’s crude oil consumed by the transport sector, part of the solution surely lies in allowing only fuel-efficient vehicles to ply the road.
As illustrated in the figure below, even with just a one-year delay of the stricter FY 2022–23 standards, our estimates reveal that the less-efficient vehicles sold would mean approximately half a million tonnes or 3.5 million barrels of additional oil imported over the next 30 years. With the current price of gasoline hovering around 75 rupees, buying this fuel will be a dent to consumers’ pocketbooks. Moreover, these vehicles would emit about 1.4 million tonnes of additional CO2 during their lifetime, and that would undermine India’s commitments to mitigating climate change under the Paris Agreement.
Meanwhile, on the economic front, greater adoption of more-efficient ICE vehicles alongside hybrids and EVs could stimulate new investment and create jobs in manufacturing technologies of the future. Stringent fuel efficiency standards coupled with fiscal incentives are complementary supporting policies for this, as seen in the European Union recently. The COVID-19 economic recovery package adopted by the German government doubles the incentive for EVs, and manufacturers are heavily promoting EVs to meet the 2020/2021 EU standards of 95 gCO2/km. Even as overall vehicle sales have suffered nearly 40% this year, the market share of EVs has more than doubled compared to last year.
With the targets regarding oil imports and GHGs already set by Prime Minister Modi, India shouldn’t risk falling behind by adjusting the CAFC standards. Indeed, instead of relaxing any near-term targets, India needs to think about tighter standards for the 2025–2030 period that match those in the European Union. This is necessary if the country truly aspires to achieve the vision of an Atmanirbhar Bharat!