Fuel efficiency a costly task for car companies, here’s why!

When CAFE regulations were first mooted in 2017, carmakers expected to meet these by focusing on diesel fuel, because diesel is traditionally more fuel-efficient than petrol.

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The automobile industry, which has seen a decline in demand and sales since the pandemic, is looking for cheaper alternative routes to meet certain regulatory norms as it is not in a position to take on any further heavy financial investment at this stage. After investing in Euro VI engine, the next regulation that the industry needs to meet is the corporate average fuel efficiency (CAFE) norms, which kick in in April 2022. While BS VI emission norms focus more on reducing harmful exhaust gases from the tailpipe of new vehicles, under CAFE norms carmakers have to improve fuel efficiency of vehicles and reduce carbon dioxide (CO2) emissions; the ‘corporate average’ refers to sales-volume weighted average for every carmaker — under CAFE, average corporate CO2 emission must be less than 130gm/km till 2022 and below 113gm/km thereafter.

When CAFE regulations were first mooted in 2017, carmakers expected to meet these by focusing on diesel fuel, because diesel is traditionally more fuel efficient than petrol. But then due to diesel car sales falling for many carmakers, extra investment into developing cleaner diesel engines to meet BS VI norms was not worth it?carmakers had to find newer solutions. One of which is hybrid technology.

Som Kapoor, partner, Automotive Sector, EY India, says that going forward, to meet CAFE regulations, one of the alternatives is hybrids. “But that comes at a cost unless the government is willing to encourage adoption (of hybrids) through policy measures with zero duty rate being the key tool,” Kapoor said. Giving the example of Maruti Suzuki, Kapoor says the company has reduced CO2 emissions from its vehicle fleet by about 20% in the past 15 years?to the FY20 level of 109gm/km, and is the least CO2 emitting fleet in India. “Maruti Suzuki has made investments in hybrid vehicle technologies as well as compressed natural gas (CNG) powertrains as a replacement to diesel to meet the stringent fuel efficiency norms to be introduced from 2022.”

Maruti Suzuki currently offers its mild hybrid technology — the engine is assisted by an electric motor so that it offers higher fuel efficiency — in all models that are powered by the 1.5-litre petrol engine (the Ciaz, Ertiga, XL6, Vitara Brezza and S-Cross), and CNG in seven models. Rajeev Singh, partner & leader, automotive, Deloitte India, adds that different carmakers are taking different routes to meet CAFE regulations. So while Maruti Suzuki is focusing on both CNG and mild hybrid, carmakers such as Honda are expected to rely on diesel — in addition to their fuel-efficient petrol engines — considering that even post-BS VI Honda is offering a range of BS VI diesel engines. Some other carmakers, especially Hyundai and Kia, are taking the turbocharged petrol engine route to meet CAFE norms.

These engines, usually between 1,000 cc and 1,400 cc, are fitted with a device called the ‘turbocharger’, which sucks in hot exhaust gas from the engine to spin a turbine that compresses air, and that compressed air is forced back into the engine cylinder, leading to more efficient combustion of the air-fuel mixture. The result is these smaller engines produce more power than a bigger engine, even as these consume lesser fuel. Hyundai and Kia, between them, offer as many as seven models with a turbocharged petrol engine. Other carmakers offering turbocharged petrol engines are Renault, Nissan (it will be introduced in the Magnite SUV), Volkswagen, Tata and Skoda.

In addition, companies such as Hyundai, MG and Tata also offer electric cars that can, to an extent, help them meet CAFE regulations. These regulations, Singh says, assume importance in the light of their ability to reduce the overall carbon footprint of the auto industry.

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