What does the NGT diesel ban mean for automakers and used car resellers?

What does the NGT diesel ban mean for automakers and used car resellers?

e National Green Tribunal today has asked the Delhi RTO to de-register all diesel vehicles in the NCR region that are more than 10 years old. That’s a huge blow to a very large segment of diesel vehicles. The ban is universal encompassing everything from passenger cars to commercial vehicles. Obviously the ruling is going to have a cascading effect on various segments of the automotive industry, consumers and manufacturer sentiment and outlay is going to shift tremendously. What all could happen, let’s take a look:

1. Deregistration of a vehicle essentially means that a vehicle is no longer permitted to be used by anybody. Its registration number stands cancelled and the RC book is supposed to be handed back to a collection point or agency (in this case the RTO) before the vehicle is sent to the scrapyard.

2. The first and obvious change is going to take place with the owners of these vehicles. There is no clear plan in place in India as to what are owners of ten year old diesel vehicles supposed to do with their vehicle. Once these vehicles are deregistered, how does the Delhi RTO intend to take them off our roads? Will they be scrapped, who scraps them and how is the procedure undertaken? Is the entire scrappage process in India an environmentally friendly process or not? More questions than answers why this one decision.

3. Delhi RTO is looking at what penalty they can levy on those using 10 plus year old vehicles, and who haven’t got them deregistered. But if this is just a financial penalty, it does little to deter the cause of reducing pollution on which this entire circus is pegged! People in India have a tendency to continue using their vehicles even after being fined and cautioned against illegal practises. Will the RTO impound the vehicle on the spot? If they do, is there an apparatus in place to manage this operation.

4. Since there is no clear scrappage policy in India, I’d assume most owners would want to resell their vehicle outside NCR limits for now. Will they be allowed to do this?

5. Now if an owner chooses to even sell his vehicle outside the region, isn’t that tantamount to him encouraging polluting? Should not the ruling be a pan India ruling then. Owners will obviously sell their cars outside of NCR soon as they come closer to their ten year life cycle.

6. What happens to the used diesel car market in the NCR region? Will prices crash?

7. What happens to new diesel car demand? Will that tank as well. We see an obvious shift to petrol. There has already been a huge move to petrol vehicles, at least in the passenger car segment, ever since the diesel ban ruling in NCR and Kerala. The skew in diesel / petrol purchase is slowly balancing itself out. And what about those manufacturers who very recently made the huge shift to diesel and suddenly see that the future isn’t as reliable.

8. What happens to all those who have invested in commercial vehicles and now have to scrap them? Taxis, trucks, light commercial vehicles. Several of these don’t see a ROI for a few years after which it would barely begin to return a profit before the vehicle would have to be deregistered. Loads of commercial vehicle owners aren’t going to be thrilled about the ruling.

9. On the other hand this also spells a windfall for manufacturers because consumers in the NCR region will need to explore a younger vehicle option every 10 years. This could mean an entirely new vehicle or a slightly old vehicle, in either case there will be more vehicles being pushed out from manufacturing plants.

10. NCR also behaves as a lighthouse for the other states, guiding them, making them aware of the happenings in the capital region and influencing their policies as well? Will the ruling for NCR cascade over the rest of the country. There was talk about the diesel ban extending to 11 other cities across India, is this the beginning of that wave?

Happy Investing

Source:Moneycontrol.com