Tata Motors, Ashok Leyland & Mahindra left with over INR 5000cr BS-III inventory
Published On Apr 17, 2017
The Supreme Court ban on BS-III vehicles has been scourging the lifeline of the auto industry. Though a wise decision in favor of the growing environmental concern, it has put most of the manufacturers at the crossroads. Despite of steep discounts in the first three days before the ban became effective from April 1, the CV manufacturers are saddled with a large inventory of BS-III vehicles which is valued at over INR 5000 crore.
The bigwigs such as Tata Motors, Ashok Leyland and Mahindra & Mahindra have been hit very hard, as a large chunk of this unsold inventory belongs to these three manufacturers. Before the ban, the total stockpile of commercial vehicles was 96,700 units, worth INR 11,000 crore. The Supreme Court verdict came on March 29th and was to be made effective starting April 1. In three days of fire-sale, the manufacturers offered huge discount on their vehicles but despite of that, they left stranded with a large inventory worth INR 5,000 crore and above. This also incurred a revenue loss of INR 1200 crore.
Sugato Sen, Deputy Director General, SIAM said that the very first option in hand of these manufacturers is to export these unsold vehicles to other BS-III compliant markets, which some companies are already doing. Second option is to recall the inventory from dealership and dismantle them at manufacturing plant, utilizing the usable components and scrapping the remaining as upgrading BS-III vehicles to BS-IV will not be a piece of cake.
SIAM suggests that this ambiguity in the business environment will affect investment as well as sales in future. The body has also urged the government to clear its stand on BS-VI norms well in advance before it becomes standard from April 2020. This will make sure that the automakers would not go through the same dilemma again.
It is noted that the European countries have already adopted the BS-VI compliant norms following which the Indian government has decided to skip the BS-V norms in order to align with the global standard of carbon emission regulations.