How Apex Court's Verdict Will Impact Auto Companies

In a landmark judgement, the Supreme Court has ordered a temporary ban on the sale of large diesel cars in New Delhi and hiked a levy on trucks entering the city, as India's highly polluted capital seeks ways to tackle one of its worst-ever bouts of toxic smog.

The registration of sport-utility vehicles (SUVs) and other diesel cars with an engine capacity of 2,000 cc or more is banned in the Capital and the surrounding region with immediate effect until March 31.

The measure reportedly unsettled automakers, who have invested heavily in diesel technology for India, long seen as a promising major auto market. Mahindra & Mahindra, Toyota and Mercedes-Benz stare at a bleak future at present. India's top utility-vehicle maker M&M will be among the worst-hit as its Bolero, Scorpio, Xylo and XUV500 are powered by diesel engines of more than two litres. Japanese carmaker Toyota's Innova and Fortuner also use 2.5-litre and three-litre diesel engines.

The apex court's verdict will also hit the luxury car market in a big way. Market leader Mercedes-Benz will be the worst affected, with its entire range having engines bigger than two litres. Audi and BMW won't be as badly hit on that count.

Over 23 per cent of the cars on Delhi roads run on diesel which produces much more carcinogenic nitrogen oxide than petrol cars. More than 1,400 new cars are added every day to the 8.5 million vehicles on Delhi's roads.

"The rich can't be allowed to buy luxury diesel cars and SUVs (sports utility vehicles) and pollute the air with adverse consequences on the health of the rest of the population," the apex court had said on Tuesday. The court also stated that the decision will not impact common man.

The impact of the decision is considered to be huge as many companies have started showing their concern that the ban will impact their sales and revenue and Delhi is one a major market for them.

"This order will need to be studied and that the impact will be direct for players who have a large number of affected vehicles. One must note, Toyota's own bestselling Fortuner and Innova account for big sales in Delhi," Vikram Kirloskar, Vice Chairman, Toyota Kirloskar Motor, told NDTV.

The ban will further raise question that how banning such limited number of vehicle in a city which has around 80 lakhs vehicles running and degrading the air quality. For the limited ban, one can only say that the decision will discourage global automaker to invest in India as one of their biggest market has just showed them a red signal.