MM Forgings Expects $5-Million Sales Hit On Potential US Green Norms Roll Back
Chairman Vidyashankar Krishnan explained that if the EPA's proposed norms take effect by 2027, the sales would increase, but if they are delayed or cancelled, the sales could be impacted.
As the US Environmental Protection Agency (EPA) reconsiders auto emissions requirements, MM Forgings Ltd estimates that any negative impact on the company is likely to be a temporary setback, given the long-term shift toward greener standards, the company’s Chairman and Managing Director, Vidyashankar Krishnan, told NDTV Profit on Mar. 17.
Last week, the US EPA announced that it may reverse the Biden Administration’s vehicle emissions rules. This includes 2024 rules that would cut passenger vehicle emissions by nearly 50% by 2032, compared to the emissions expected in 2027. This is likely to prompt automakers to produce more electric vehicles (EVs). The EPA is also reconsidering a 2022 rule aimed at reducing emissions from heavy-duty trucks, as the guidelines make trucks more expensive. The Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles rule was announced by the EPA in March 2024.
Krishnan explained that if the EPA’s proposed norms go into effect by 2027, there could be a pre-buy in 2026, boosting sales by $3-4 million for his company. However, if the regulations are delayed, there would be no pre-buy and the demand would be spread out, which could balance out over time. The company specialises in manufacturing steel forgings, with a strong focus on commercial vehicles, including trucks.
“There is no negativity because what happens is that if in 2026 there is a pre-buy, in 2027 there will be a slump due to the pre-buy. Now, if the pre-buy is not there, well, the demand will be evened out over a couple of years, which is also good. But it's not a bad thing by any stretch,” he noted.
On the development, Krishnan said that if the norms don’t proceed, MM Forgings could lose around $4-5 million, or 10% of sales, but maintained that the impact would be temporary.
“If there is a pre-buy in 2026, it will be followed by a slump in 2027-2028, so it's even-stevens over two, two-and-a-half years. The EPA has confirmed emission standards for light-duty and medium-duty vehicles, with a roadmap up to 2030. They’re definitely pushing ahead with a green norm and any shift in the timeline will still be neutral over time,” he said.
He also noted that the company plans to gain market share in the European heavy truck industry, which, unlike the US, has remained stable. According to him, MM Forgings is seeing strong traction from the European customers, and there is optimism about a potential economic rebound in Europe, particularly if the Ukraine conflict comes to an end.
Share of MM Forgings closed 3.24% lower at Rs 338.45 apiece on the NSE on Monday, compared to the benchmark Nifty50 settling at 22,508.75, up 0.5%.
