New Tractor Emission Standard To Impact 7-8% Of Domestic Volume: ICRA

The new emission standard, Bharat Stage TREM IV, for tractors of engine power of over 50 horse power set to kick in from January 2023, will impact around 7-8% of the domestic volume, according ICRA.

The ratings agency also expects the manufacturers to gradually pass the cost increases to customers.

A big proportion of the overall industry, less than 50 horse power (HP), constituting around 92% of sales in FY22 would continue to be governed by Bharat Stage TREM IIIA norms, ICRA said in a statement.

The implementation of the revised emission norms for the over 50-HP segment was initially slated to be implemented from Oct. 2020. However, this was deferred multiple times with the government taking cognisance of industry representations amid the disruptions brought about by the pandemic.

"India remains a medium-to-high HP tractor market, with around 80% of the sales coming from the 30-50 HP categories."

"The revised emission norms applicable from Jan. 2023 would apply only to more than 50 HP tractors, impacting around 7-8% of the overall industry volumes," ICRA Vice President, Corporate Ratings Rohan Kanwar Gupta said.

The technological know-how to meet the revised norms has been readily available with the original equipment manufacturers (OEMs) as the export models are already meeting the evolved emission norms, he added.

"The pass-through of the hike to customers is, however, expected to be only gradual for the price-sensitive farming community," Gupta said.

ICRA said the transition to new emission norms will lead to a rejig in tractor horse power-wise mix.

"OEMs are in the process of realigning their product portfolio, with tractors offering higher torque at lower HP being added to the portfolio. The same would lead to a shift in HP-wise mix with the 41-50 HP segment gaining at the expense of the over 50 HP segment," Gupta said.

In India, the emission standards for tractors and construction equipment are regulated separately from the broader automobile industry, which has already moved to BS-VI norms from Apr. 2020.