The Government of India (GoI) has notified mandatory fuel efficiency standards for passenger vehicles (PV), which will be implemented in two phases starting April 2016. While the first phase, ending FY21, targets to improve fuel efficiency by 10%, the second phase, beginning FY22, targets nearly 27% improvement in fuel efficiency from the current level.
''Though clarity is yet to emerge in terms of OEM specific targets/reductions and penalties, our initial calculations indicate that while Maruti Suzuki (MSIL; 'Hold') is already well within its standard by 7%, Mahindra & Mahindra (M&M; 'Buy') underperforms the consumption standard by nearly 7%. While the latter has three new platforms and a new engine lined up for launch in FY16 that may address the shortfall, performance of the new products will be a monitorable for the company,'' said Edelweiss Securities.
''Our analysis indicates that currently MSIL's actual average fuel consumption is ~7% better than the company's standard; hence, there is no risk in the near to medium term. On the other hand, M&M's current fuel consumption underperforms the standard by 7%. While the latter already has a new product strategy in place which may address the shortfall vis-à-vis the fuel efficiency standard, the new product portfolio's performance and clarity of enforcement clauses are key monitorables,'' it added.
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