Just two more days to go before the deadline for auto makers to stop selling BS-III and switch to BS-IV emission vehicles. On Wednesday, the Supreme Court refused to give any respite to companies and banned the sale of vehicles, which are not compliant with BS-IV emission norms from April 1.
"Health of the people is far more important than the commercial interest of automobile manufacturers," the apex court observed.
Many companies had already switched manufacturing only BS-IV vehicles. However, some of them, particularly some two-wheeler and commercial vehicle makers, were still making BS-III vehicles though the government had notified March 31 as the last date to make such vehicles. There is still a lot of inventory in the system. Care Ratings estimates that the value of the unsold BS-III vehicles would be as much as Rs 14,000 crore.
"The automobile industry has an unsold BS-III vehicles inventory of 8.24 lakh units (commercial vehicles – 96,700, passenger vehicles – 16,198, three-wheelers – 40,000 and two-wheelers – 671,000)," according to Care analyst Darshini Kansara.
Companies must now either accelerate sales of BS-III vehicles over the next couple of days, or look to export the unsold stock, in markets where BS-III vehicles are sold.
"Considering the average per day sales for 2016-17 (Apr-Feb), the new inventory comes down to 6.84 lakh units in case sales are enhanced by two additional days volume of sales (that is for 30th and 31st March). This would reduce the inventory to zero for passenger vehicle stock. However, the cost of the unsold inventory of CV & two and three wheelers would be around Rs 12,500 crore as on 1st April, 2017," added Kansara.
Even if companies export the remaining stock, it will take as much as ten months to clear the BS-III inventory of trucks, say analysts.
"Given the current demand, majority of the vehicles in the pipeline have already been sold. Some more will be sold in the next couple of days where we have customer orders," said Vinod Dasari, MD and CEO, Ashok Leyland.
Dasari, who is also the president of Society of Indian Automobile Manufacturers, had already said that the auto industry had not sought any deferment or delay in the implementation of BS-IV emission norms.
"The auto industry is fully committed to commence manufacturing of BS-IV vehicles from April 1, across the country. The auto industry has fully complied with all technical regulations in the past and will remain fully compliant in future also," he said.
While companies have been manufacturing BS-IV vehicles from 2010 onwards, BS-III vehicles were still made and sold due to lack of availability of BS-IV fuel. Availability of fuel had been the main issue for the industry, Dasari said.
German commercial vehicle maker Diamler has come out in support of the Supreme Court verdict saying BS-IV standard will bring much needed improvements in terms of air quality, to the benefit of the people and the environment.
"At BharatBenz, we had made the strategic decision last year to only focus on BS-IV vehicles, and we have worked relentlessly for more than a year to achieve this. Consequently, we gradually phased out BS-III in our business system and have made the switch to produce only BS-IV vehicles in March, exactly according to plan," said Erich Nesselhauf, MD and CEO, Daimler India Commercial Vehicles.
India's largest two-wheeler maker Hero MotoCorp has been reducing its inventory of BS-III vehicles over time, according to dealers, and has been only manufacturing BS-IV compliant products from early March.
"We have reduced our inventory significantly in the past few months with the aim to minimise our stakeholder losses. However, environmental protection will take precedence over temporary financial benefits," PTI quoted Hero MotoCorp Chairman Pawan Munjal.
Cost of BS-IV compliant medium and heavy commercial vehicles is expected to rise around Rs 1-2 lakh from the current price of BS-III vehicles, while two-wheelers will be expensive by around Rs 1,000-1,500 according to market men.
