Davos 2019: Stricter Emission Norms A Y2K Moment For Automakers, Says Pawan Goenka

A few of Mahindra & Mahindra Ltd.'s products may miss the deadline of switching to the Bharat Stage-VI emissions standards, according to its Managing Director Pawan Goenka.

He said that the entire auto industry faces this problem. “Everyone is putting up a brave face. But I don't think anybody can guarantee whether they'll be all ready,” Goenka told BloombergQuint on the sidelines of the World Economic Forum in Davos, Switzerland. “For most of our high-volume products, we will probably be ready—just in time. But some of the lower-volume products may spill into April or May [in 2020].”

The Supreme Court ruled that BS-VI emissions standards must be effective from Apr. 1, 2020, saying that no vehicle under the existing BS-IV should be sold or registered from then.

This deadline, according to Goenka, is the auto industry's “Y2K” moment. “It makes a huge task in terms of SCM (supply-chain management), ramping up BS-VI and ramping down BS-IV. There are constraints on not being able to sell beyond Mar. 31 (BS IV products),” he said. “What will happen on Apr. 1 [2020] is hard to imagine.”

On Muted Festive Demand

Goenka attributed the muted demand in the last festive season to a slowdown in the last few months. “There were too many things that weren't going right for the industry. Crude oil prices were high, exchange rate wasn't favorable, commodity prices were high and a few regulatory changes increased the prices of cars,” he said, adding he expected demand to return to normalcy during the January-March. The rupee rose to a record of Rs 74.40 against the greenback last year and crude prices jumped nearly 20 percent till October.

Q4 Tractor Sales

Goenka predicted pick up in tractor sales overall. He also said it isn't comparable with the previous year due to a higher base. "The current season's sales would depend on monsoon expectation and how good the rabi crop is... and also the availability of finance."

Commercial Vehicle Demand

Demand for heavy commercial vehicles was affected more than that for passenger vehicles, according to Goenka. He attributed it to the new regulation on axle loading norms which has given extra capacity to the logistics industry.

Ties With Ford

M&M's partnership with Ford was for synergies, and to reduce development costs, said Goenka. He declined to comment on reports suggesting the U.S. carmaker may pick up equity in the group's parent company, M&M Ltd.

Watch the full interaction here: