SC order on BS-III vehicles leaves automakers with Rs7,000-cr unsold stock

The Supreme Court's decision banning all BS-III-compliant and lower grade vehicles from 1 April has left automakers with huge unsold inventories, with no chance of offloading these in the market anytime before the 1 April deadline.

Auto firms will now have to look at overseas markets to liquidate inventories worth over Rs7,000 crore, say reports quoting industry sources. They may also have to offer steep discounts, ship products to BS-III export markets or invest to upgrade their products to BS-IV.

At the close of the current 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, according to industry data

A division bench of the Supreme Court consisting of Justice Madan Lokur and Justice Deepak Gupta passed the order after a hearing that lasted several days.

The apex court order has come as a big blow to automakers such as Tata Motors, Ashok Leyland and Hero, who are holding on to a large inventory of BS-III vehicles, estimated to be worth Rs6,000-7,000 crore at the end of March 2017.

These companies have now sought time beyond 1 April to dispose of the existing stock.

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.

The government, which had brought out the notification on BS-IV, had told the court that sales could continue after 31 March. The notification had stated that manufacturers should comply with BS-IV norms from 1 April 2017, but was silent on the fate of vehicles manufactured before 31 March as far as sales and registration were concerned.

The total inventory of commercial vehicles, two-wheelers, three-wheelers, and passenger vehicles was 8.24 lakh units as of 20 March 2017.