Impact of BS-III Ban on Commercial Vehicles: Transitory or Long Lasting
Published On Apr 03, 2017
The Supreme Court ban on the sales of BS -III vehicles starting April 1st 2017 has sent shock waves across the auto industry as they left in a tussle over the piles of stock they possess. The industry had unsold stock of around 8 lakh vehicles. Though many of the passenger car makers and two wheeler companies have managed to shell out the stock in the two-day bumper rebates and freebies, the story of commercial segment is altogether different. These people were seen desperate in offloading their inventory by giving sizeable discounts.
Experts says that though the automakers were notified about the transition well in advance, the earlier legal position of 31st March was that on ‘sales’ not on ‘registration’ on new BS III vehicles. So the commercial vehicle segment will be the most impacted as the Apex Court decision of changing the applicability of the cut-off date from production to sale has rendered many of the BS III vehicles unsaleable. The only option they have is to either recall and convert the existing units or export these to developing countries.
According to various heavy vehicle manufacturers, the ruling on Bharat Stage III emission norms has certainly perplexed the entire segment as it will affect around 97,000 vehicle stockpile. However, the material impact according to Mahindra will be one-time as many of the automakers have already started adopting the latest framework ordered by the Apex Court. They have started increasing the production of BS-IV compliant vehicles to ensure easy sustainability across the operations.
On the other hand, a report suggests that only 50 percent of the entire commercial vehicle inventory has been sold before the Supreme Court’s deadline of 31st March. According to FADA (Federation of Automobile Dealers Association), the discount on heavy vehicles was given by the OEMs not the dealers, so the latter aren’t in loss. This is certainly appalling to the manufacturers.
The prime reason behind the lack of sales is that it’s the end of fiscal year and many buyers wouldn’t have enough money for the purchase despite of tempting discount ranging from INR 1.5-5 lakh and credit up to 30 days given by various fleet operators to clear the inventories. An official from Ashok Leyland, the largest player and the most affected in the game, raised concern over the issue but says they are confident to get rid of the huge 10,000 unit inventory. They also said they have option of either exporting a portion of the unsold stock or recall the vehicles and convert them to BS IV as the cost of swapping over will be less.
BharatBenz, the Indian division of Daimler India Commercial Vehicles has supported the transition with more than 1,000 BS IV trucks already plying on roads. On the other hand, Tata Motors, another leading player in the business has termed it an unexpected and unprecedented move. However, company also said that they have minimal stock of BS III as they have been working on BS IV vehicles since 2010 while the leftover stock will be either exported or upgraded to BS IV.
The overall impact seems to be for a limited time period as the auto industry has been working on BS IV vehicles since 2010, but the lack of BS4 compliant fuel has certainly affected the sales. However, following the Supreme Court’s ban, government has now launched the BS IV fuel nationwide. Though the fuel was already available in many cities across the country, the full-scale availability will help the automakers to lessen the impact right to some extent.
