New Diesel-Gulping SUVs Banned in Delhi to Fight Toxic Air

  • Top Indian court bans diesel vehicles of 2 liters or more
  • Automaker Mahindra & Mahindra declines 5.5% on ruling

Big fat diesel-guzzling SUVs are becoming an endangered species in New Delhi as India’s capital grapples with hazardous air pollution.

The nation’s Supreme Court on Wednesday temporarily banned the registration of larger diesel vehicles in the city, such as the SUVs beloved by political power brokers and wealthy residents, after acrid gray haze spread across the metropolis on some days following the onset of winter.

Registrations for vehicles with diesel engines of 2 liters or more were suspended through March 31, sending the shares of India’s biggest SUV maker Mahindra & Mahindra Ltd. down the most in more than three months. The court also doubled a levy on diesel vehicles entering the capital and barred those registered before 2005 altogether.

The push to clean up some of the most toxic air on the planet that could set a precedent for other choking Indian conurbations.

"We’ll now see this happening in other cities, sooner or later," said Piyush Jain, a Mumbai-based analyst at Morningstar Investment Services Inc.

Green Ruling

The order follows an environmental court’s separate decision last week to halt the sale of new diesel vehicles in the city. Delhi’s state government is also preparing to take about half the vehicles off the capital’s congested roads next month to keep the haze away.

“The industry works on long time cycles," said Kumar Kandaswami, a senior director at Deloitte Touche Tohmatsu India. “Therefore, changes that have a short-term implication cause significant disruption. Since the changes are about the largest consuming market, the anxiety of the manufacturers is understandable.”

New Delhi has a per capita income three times the national average and is the biggest market for passenger cars in the country, with about 2.8 million private vehicles including SUVs and vans registered as of March.

Mahindra slid 5.5 percent to 1,218.05 rupees, the biggest decline since Aug. 24, in Mumbai. The benchmark S&P BSE Sensex rose 0.7 percent. The company will be the hardest hit among listed Indian automakers as others largely make passenger vehicles with an engine capacity of less than 2 liters, according to Angel Broking Ltd.

Mahindra’s Response

“There will definitely be an impact on deliveries,” said Bharat Gianani, an analyst at Angel Broking. “In the long term, I expect automakers and the government to work to find a permanent solution."

Mahindra will abide by the court’s decision and develop vehicles that comply with stipulations even if the company believes the decision isn’t optimal, Chairman Anand Mahindra said Wednesday in a Twitter post. The vehicles affected represent about 2 percent of Mahindra’s total monthly sales, the automaker said in a statement.

Tata Motors Ltd. said it will see some impact on its sales in the three-month period specified by the top court in its order.

“The long term regulatory regime should focus on the overall emissions-control roadmap rather than any specific fuel or technology,” Tata Motors said.

India’s capital accounts for about 7 percent of total passenger vehicle sales in the country. The contribution of diesel vehicles is about 2 percent to 3 percent of total industry volumes, according to Gianani. Deliveries of cars, minivans and sport-utility vehicles nationwide rose 8.9 percent to 1.8 million in the eight months through November.

New Delhi’s parlous air quality rivals even Beijing, which last week suspended schools, restricted car travel and banned fireworks and outdoor barbecuing.

Levels of PM2.5 -- tiny, toxic particles that lead to respiratory diseases -- have exceeded 600 in the past month or so in India’s capital. That’s about 23 times the World Health Organization’s 24-hour mean guideline.

Aside from vehicle fumes, millions of India’s poor burn fires for domestic use as well as farming, while wealthier folk fire up belching diesel generators as grid electricity is unreliable. The emissions add to the pollution challenge facing Asia’s third-largest economy.

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