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The trend of electrification and regulations around vehicle safety and emissions have come as a blessing in disguise for auto component manufacturers in India, a report by The Economic Times said.
The new rules and trends are increasing the need for content per vehicle and this, in turn, is helping companies boost their revenue and profits. Ashwath Ram, managing director of engine maker Cummins India, told ET that as the emission standards are tighter, it has improved business for “every automaker”.
“The regulations will help us grow our share in the pie and grow our pie,” he said. Ram added that Cummins wants to expand its business at twice the pace of the country’s GDP growth. “While doing that, we want to increase our profits by 1 per cent every year till we get to our highest historical levels of profit of 18-20 per cent,” he added.
From April 1, the Indian auto industry will transition to Bharat Stage VI-B emission standards. The passenger vehicles will be required to disclose their corporate average fuel economy (CAFE-II) scores with the government. The companies also need to meet Real Driving Emissions (RDE) rules.
These changes can lead to a price increase across categories for the new components. For petrol vehicles, the price may rise by 2 per cent and for diesel by 3-3.5 per cent, the report said.
Also, from October, the Centre is also expected to implement new safety-related features like six airbags etc. This is also likely to push the prices of vehicles upwards.
“Addition of every airbag will improve the realisation for the airbag manufacturer and cost for the buyer,” Hemal Thakkar, director at Crisil Research told ET adding that the cost of the vehicle would go up anywhere between Rs 15,000 and Rs 25,000 for incorporating four additional airbags.
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