SC ban on BS III vehicles will cost the auto industry nearly Rs 12,000 crore

Leading commercial vehicle makers of India, such as Tata Motors, Ashok Leyland and Mahindra & Mahindra, along with and two-wheeler majors Hero MotoCorp, Honda and TVS will have to bear the brunt of Supreme Court’s ban on BS-III vehicles.

The ban, which will be implemented from April 1, would leave the Indian auto industry with a near-junk inventory worth over Rs 12,000 crore.

The ban will disallow sale and registration of all BS-III vehicles from April 1.

Vehicle dealers will also have to face inventory holding costs and possible delays or defaults in bank loans that they had taken to buy stocks.

To avoid these losses, the companies had asked to be allowed selling the existing BS-III vehicles that had already been made and dispatched to dealers. However, SC did not compromise with its decision, which would result in less pollution and more efficiency.

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As on March 20th, the total inventory of commercial vehicles, two-wheelers, three-wheelers, and passenger vehicles combined was 8.24 lakh units; while some would have been sold, a major share of this number would go junk April onwards.

"Auto industry, anywhere in the world, requires a stable and predictable policy which allows for long-term planning and investments," said Society of Indian Automobile Manufactures (SIAM) president Vinod Dasari.

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What’s surprising is that even as commercial vehicle makers knew that BS-III vehicles could be banned from April, they kept on manufacturing these vehicles.

Now, they are left with only a few options, like upgradation of vehicles to BS-IV (if possible), or exporting them to countries that accept them. Both measures mean a good amount of cash outflow.

(Image source: India Ink)