As the Indian auto industry races to meet the Bharat Stage VI emission deadline of 2020, the government is simultaneously working on formulating and inducting a Voluntary Vehicle Modernisation Program (VVMP). This scheme entails excise duty sops to buyers who surrender their old vehicles and replace them with new, less emitting ones. As heavy trucks and buses account for more than 55% of overall vehicular diesel consumption and contribute 65% to vehicular pollution, it is imperative to implement these norms in the M&HCV segment  We intend to take a holistic view of VVMP—rationale behind its genesis, implications for domestic auto/ M&HCV industry, analyse effects of its implementation in other international markets, etc. Anchored by our analysis, we believe that VVMP will be a game changer that entails the potential to revitalise the hitherto sagging fortunes of the domestic M&HCV industry.

Benefits to economy and environment:

• Fuel savings of ~USD 2.7 Bn p.a.
• A significant 90% dip in CO2 and 77% drop in PM levels.
• Truck operators’ net margins double. 

Benefits for automotive industry: 

• M&HCV demand estimated to grow in excess of 20% Y-O-Y in FY18 and FY19, belying expectations of a cyclical slowdown during the period.
• Spur OEMs to invest ~INR 3,500-4,500 Cr in capacity expansion primarily via de-bottlenecking and brown field expansion, to meet surging demand.
• Significant jump in top line and profitability of OEMs and auto component players catering to the M&HCV segment.

 Our deep dive analysis indicates bountiful benefits for OEMs—Tata Motors and Ashok Leyland—and auto component players—Wabco India, Jamna Auto, Secto Automotive, Harita Seating Systems, Bosch and Bharat Forge.