We consider a 30% cess on diesel vehicles equal to a ban: Roland Folger

Interview with MD & CEO, Mercedes-Benz India

The ban on sale of diesel cars of a certain engine capacity in the Delhi region and like measures being contemplated by the Supreme Court are a big worry for Mercedes-Benz India, the country’s largest luxury car maker. Roland Folger, managing director and chief executive officer, talks to Ajay Modi. Edited excerpts:

Contrary to industry's expectations, the Supreme Court’s ban on diesel vehicles (2,000cc and above engines) in the National Capital Region (NCR) has stayed for over six months. What is the reaction from your headquarters?

The ban was a disruptive element that was difficult to foresee. The question from Germany always is, have we done anything wrong? When we tell them our vehicles are in line with the regulations, we are asked where the diesel ban comes from. The problem was that we did not have a very good reason to explain what has happened. The thought processes that led to such decisions are very difficult to comprehend outside (the country).

This lack of credibility then leads to slowing of investment and not looking favourably at the market potential. That is not a good thing to have.

In what way can Mercedes contribute to lowering of vehicular emission?  

BS-VI (the Bharat Stage-VI emissions norms) will bring diesel emission to the level of petrol and add a diesel-specific benefit of 25 per cent lower carbon dioxide emission. We have committed ourselves to bring BS-VI at a much earlier stage (than the government's target), by 2018. The whole automotive industry might not be able to do that but somebody has to start.

We have it available in Europe and we can get it, with some adjustments and checking. I am propagating moving the earliest because if you wait until 2020, I can assure you it won’t happen. BS-III and BS-IV took 10 years. But, we need to find someone who can give us the fuel for running these.

The challenge is that service providers might not have fuel ready. There are local refineries that export BS-VI fuel and can be used.

Will you shift your entire product range to petrol?

We have covered almost the entire product line with petrol options. A few that are left will be done during the year. The customer will have a choice. We don’t see a massive shift to petrol, as many users still believe in diesel. Buyers prefer to wait to buy a diesel car.

Is there a concern that the NCR ban might be replicated in other cities?

We don’t see that as a serious issue, at the moment. We assume the ban will stop sooner or later. It does not show any measurable improvement in fuel quality in the NCR.

Mathematically speaking, the number of these vehicles is so small that they cannot affect the air quality. I believe that the diesel ban will go, since it is not cleansing the air and so, will not find a way to other cities.

The SC is talking about a 30 per cent cess on 2,000cc diesel vehicles. Does that make some of your models uncompetitive compared to others?

Of course. We consider a 30 per cent cess the same as a diesel ban. It is very simple. A diesel vehicle is already more expensive than petrol. Considering the limited financial benefit that you get due to the price differential between the two fuels, some of the cars need to run for 10 years to recover the extra investment. If you add another 30 per cent to the price, why would anyone in the world buy (a) diesel (driven-vehicle) any more?

The SC is talking about a 30% cess on 2,000cc diesel vehicles. Does that make some of your models incompetitive compared to others just because they fall below 2,000cc?

Of course. We consider a 30% cess the same as diesel ban. It is very simple. Diesel vehicles are already expensive to petrol. Considering the limited financial benefit that you get due to price differential between the two fuels, some of the cars need to run for ten years to recover the extra investment. If you add another 30% to price, why would anyone in the world buy diesel anymore. So, that is equivalent to a ban.