BS-III deals a blow to automakers sitting on inventory worth Rs 7,000 cr

Second body blow after diesel ban on engines of 2,000 cc and above in NCR

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The decision leaves automobile makers, primarily Tata Motors, Ashok Leyland and Hero, saddled with a large inventory of BS-III vehicles estimated to be worth Rs 6,000-7,000 crore at the end of the month. Companies were seeking time beyond April 1 to dispose of the existing stock. They now will have to offer steep discounts, ship products to BS-III export markets or invest to upgrade their products to BS-IV.

This is the second major blow for the industry from the apex court in the past 15 months. In December 2015, the court had imposed a ban on sales of diesel vehicles with an engine of 2,000 cc and above in the National Capital Region. The ban, which primarily impacted Toyota and Mercedes, was lifted in August last year. Wednesday’s order also impacts others like SML Isuzu, VECV and Honda Motorcycle and Scooter India.

Wednesday’s order was passed by a division Bench consisting of Justice Madan Lokur and Justice Deepak Gupta after a hearing over several days.

At the end of the month, companies, along with their dealers, might be left with an unsold inventory of 500,000-600,000 BS-III vehicles, mostly two-wheelers and commercial vehicles. The government, which had brought out the notification on BS-IV, had told the court that sales could continue after March 31. The notification had stated that manufacturers should comply with BS-IV norms from April 1, 2017, but was silent on the fate of vehicles manufactured before March 31 as far as sales and registration were concerned.

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Bajaj may be left with a small number of BS-III two-wheelers at the end of this month. S Ravikumar, president (business development) at the company, told Business Standard that one of the options before the firm was to take back the unsold stocks from dealers and divert them to export markets. “We are the largest exporter of two-wheelers. So, that should not be an issue.”

However, export is not a simple option for every company. Manufacturers will need to suitably modify the vehicles to meet the local regulatory requirements in export markets. Over the next three days, dealers are expected to dole out heavy discounts to clear as much inventory as possible.| read more…

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