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March 30, 2017

Motown skids as apex court jams BS III wheels

The Supreme Court’s March 29 ruling banning the sale and registration of BS III-compliant vehicles from April 1 has caught automobile manufacturers off-guard. The decision puts inventory worth ~Rs 17,000 crore at risk.

As per the Ministry of Road Transport and Highways’ earlier notification, the manufacturers would anyway have had to shift to BS IV vehicles from April 1, 2017. However, there was some confusion on the applicability of the mandate on production and registration of such vehicles. The manufacturers were looking at a staggered transition, with support from the Central Government and the Society of Indian Automobile Manufacturers (SIAM).

SIAM estimates put the inventory of BS III-compliant vehicles at 823,000, the bulk of it lies with nearly 20,000 dealers, besides the manufacturers themselves. Of this, two-wheelers account for about 80%, commercial vehicles (CVs) 10-12%, three-wheelers 5% and passenger vehicles 2%.


Big blow for CVs, mostly MHCVs


Vehicles weighing less than 3.5 tonne account for about 45% of the total CV production, many of which are BS IV compliant. Thus, about 70% of the BS III stock would comprise vehicles above 3.5 tonne. This brings the BS III stock to around 68,000 for vehicles over 3.5 tonne and 29,000 for those under that, valued at Rs 10,000 crore and Rs 1,600 crore, respectively.


The inventory represents about 0.81 months of sales for sub-3.5 tonne vehicles and 2.1 months of sales for vehicles over 3.5 tonne. It is highly unlikely that dealers, who have about 80% of this stock, will be able to sell this with just a couple of days to go.