Input costs for the manufacture of BSVI vehicles will go up as the hike in import duty on certain auto components, announced by Finance Minister Nirmala Sitharaman as part of her Budget comes into effect.

The announcement comes at a time when the auto industry is preparing to migrate to the Bharat Stage VI emissions standards, which will bring with it steep price hikes on vehicles vis-à-vis their BSIV counterparts.

The govt has raised import duty on catalytic converters, and various parts and metals which go into their making in the range of 2.5 percent-5 percent. The catalytic converter is an essential component, especially in the BSVI regime as it controls toxic emissions from vehicles by converting them into less-toxic exhaust by way of a redox reaction.

The move has surprised the auto industry, considering the timing of the decision.

“There’s an increase in the catalytic converter component which surprises me. I don’t know why it was done. We’re going into BSVI right now, and BSVI has a much larger content of many of the parts on which duty was raised, which will increase BSVI cost further, and we’re already concerned about the cost of BSVI vehicles”, Pawan Goenka, MD & CEO, Mahindra & Mahindra told CNBC-TV18.

Besides catalytic converters, import duty on completely built-up units of commercial vehicles – such as trucks and buses – has been raised by 10 percent from 30 percent to 40 percent, though the impact here is negligible since few companies import CBU commercial vehicles into the country.

Many OEMs import catalytic converters or inputs required for the manufacture of the converter, and the increased duty will have an adverse impact on them as they switch their portfolio to BSVI.