20% hike in vehicle cost seen in Euro IV switch

By Catherine N. Pillas, BusinessMirror

Posted at Jun 02 2014 07:48 AM | Updated as of Jun 02 2014 03:48 PM

MANILA - The auto industry expects up to 20-percent increase in the prices of vehicles once they are modified to become compliant with the Euro IV standards on emissions as mandated by the Department of Environment and Natural Resources (DENR).

In September 2010 the DENR issued Administrative Order 2010-23, requiring all new passenger and light-duty vehicles that will be introduced in the market by January 1, 2016, to comply with the Euro IV emission limits.

Lawyer Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc. and vice president of Toyota Motor Philippines, assured that all new models that will come out in 2016 will already be Euro IV-compliant, while the vehicles introduced before 2016 will undergo engine modifications to meet the standards.

The “greener” vehicles, however, would become more expensive. “We are ready to meet modifications to comply with the standards. We’re looking at incurring additional cost of P100,000 to P150,000 per vehicle for the existing models,” Gutierrez said in a phone interview.

Gutierrez clarified that the additional cost will only apply to models already being offered to the market, as the new models to be introduced in 2016 will already incorporate the cost of engine modifications.

As for the actual vehicle pricing, Gutierrez declined to comment on the price effect on existing models but conceded that there will be “price adjustments, depending on the assemblers.”

The more environment-friendly Euro IV emission standard mandates a ceiling of maximum sulfur content at 50 ppm (parts per million), in contrast to the prevailing Euro II emission standards that allows 500 ppm maximum sulfur content.

Engines fitted in luxury vehicles offered by Toyota such as the Camry and Lexus are already Euro IV compliant, said Gutierrez, but currently there is no certification yet for the said standard emissions in government agencies so they are still documented as Euro II compliant.

He also assured that there will be “off-setting factors” that will make sure Toyota vehicles will still be offered at competitive prices.

Froilan Dytianquin, vice president of Marketing Services of Mitsubishi Motors Philippines, also estimates the additional cost per vehicle to be within the range of P100,000 to P150,000, but will mostly apply to advanced common rail diesel engines.

The said engines will have more components to adapt to Euro IV fuel, which is now offered by SeaOil and Petron Corp.

“The cost increase may possibly range from 10 percent to 20 percent. There may be minimal cost increase from gasoline-fed vehicles, but higher cost penalty for diesel-fed vehicles [especially common rail diesel engines],” Dytianquin said in an e-mail interview, adding that manufacturers are expected to pass on the additional cost to consumers.

Dytianquin, likewise, assured that all new model vehicles of Mitsubishi Motors Philippines will be compliant by January 2016.

“Right now all of our vehicles [both completely knocked down and completely built units] are Euro II compliant only. We expect to upgrade compliance of these vehicles or introduce a successor model latest by end-2017,” Dytianquin said.

For Isuzu Philippines Corp., Arthur Balmadrid, senior vice president for Sales, said the 20-percent cost increase is possible. But for Isuzu, it remains an estimate and is subject to change.

“The 20 percent is just an estimation; it really depends on how competitive other [companies] are. Some companies may impose equivalent pricing and there’s another factor such as if there will be subsidies from Japan to comply with the standards,” Balmadrid said in a phone interview.

He said Isuzu is ready to comply with the new emission standards.