BS III ban: Auto makers race against time to clear inventory
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New Delhi: Indian automobile makers are in a race against time to clear inventory. That’s because the Supreme Court on Wednesday banned the sale of vehicles not compliant with Bharat Stage IV (BS IV) emission standards from 1 April, leaving them with just three days in which to dispose of hundreds of thousands of BS III vehicles.
According to a submission made by the lobby group Society of Indian Automobile Manufacturers (Siam) in the Supreme Court on 20 January, the industry had around 820,000 units of two-wheelers, commercial vehicles, both small and large, passenger vehicles and three wheelers, at various stages of inventory clearance.
Of these, the two-wheelers inventory was estimated at more than 670,000 units and those of commercial vehicles around 100,000. In the inventory were around 40,000 three-wheelers; the rest were passenger vehicles.
India’s largest two-wheeler company, Hero MotorCorp Ltd, alone had an inventory of more than 300,000 vehicles compliant with BS III emission norms that are being phased out.
The nine-day Navratra festival, an auspicious time for the purchase of consumer goods that began on Tuesday, could potentially spur sales over the next two days. Auto companies are also considering discount offers and exploring the possibility of exporting left-over vehicles to countries where BS III norms are still in force.
A person familiar with Hero MotoCorp’s plans said on condition of anonymity that since 20 March, the company had managed to sell two-thirds of the 300,000 BS III two-wheelers it had in its inventory. Mint could not verify the claim independently.
Pawan Munjal, chairman and managing director of Hero MotoCorp, said the company has been producing only BS IV compliant vehicles for the past one month.
“We have reduced our inventory significantly in the past few months with the aim to minimize our stakeholder losses. However, environmental protection will take precedence over temporary financial benefits... We respect the sentiments of the judiciary and the government,” Munjal said in a statement.
Ashok Leyland Ltd claimed that it had already sold most of its BS-III vehicles. The remaining inventory after 31 March will be exported, it said, or upgraded to BS-IV standards.
“Contrary to the various reports in the media about Ashok Leyland having to take a huge write-off of BS-III inventories, the company clarifies that in-fact the impact will be minimal,” Leyland said in a statement.
Multinationals such as Daimler AG’s local unit have already phased out their BS-III products.
“Today’s decision of the Supreme Court reassures us in our belief that industry interests must go together with the interests of the society at large. The BS-IV standard will bring much needed improvements in terms of air quality, to the benefit of the people and the environment,” said Erich Nesselhauf, managing director and chief executive, Daimler India Commercial Vehicles Pvt. Ltd.
The company will introduce its new range of BharatBenz trucks, with BS-IV technology.
“We could not have chosen a better timing to introduce these fresh new products,” Nesselhauf said.
Rating agency Icra said the low availability of BS-IV compliant vehicles could hurt commercial vehicle sales in the upcoming month.
To liquidate stock, commercial vehicle makers will be pushed to offer “higher discounts, which continue to be at elevated levels for the past few years,” Icra said. “The extent of loss...will be a function of inventory-mix. For instance, relatively older or slow moving models may be difficult to liquidate,” it said.