BS-III stock continues to haunt auto firms

Companies still saddled with BS-III inventory worth H5,000-crore; take H1,200-crore hit on heavy discounting
BS-III stock continues to haunt auto firms

CHENNAI: The consequences of the BS-III vehicle ban are still playing out, with auto industry body Society of Indian Automobile Manufacturers (SIAM) stating on Tuesday that two-wheeler and commercial vehicle makers together are saddled with a BS-III inventory worth Rs 5,000 crore.

The heavy discounting employed by these firms during the last two days of March to clear away lakhs of BS-III units have also impacted balance sheets by a cumulative Rs 1,200 crore. The Supreme Court banned manufacture, sales and registration of BS III vehicles from April 1, 2017.

According to documents filed by SIAM with the Supreme Court, automakers had 8.24 lakh BS-III vehicles in stock as of March 20 — 6.71 lakh two-wheelers, 96,700 commercial vehicles, 40,048 three-wheelers and 16,198 passenger vehicles.

“Most of the two-wheeler stock was liquidated during the last two days,” pointed out Vishnu Mathur, director-general, SIAM. However, the heavy discounting employed to liquidate this stock, mostly from dealers, has led to significant impact on revenue for the month.

“The revenue loss of the industry due to discounts, mostly by the two-wheeler makers, is to the tune of Rs 1,200 crore,” Mathur said. Firms that still have stock, close to 120,000 units, are exploring several options.
Sugato Sen, deputy director-general, SIAM, pointed out that the first option is to export these vehicles to markets that still allow BS-III stock, since it “will be expensive” to bring them back to factories and upgrade them to BS IV standards.

 “These markets will primarily be in the African and South Asian geographies,” admitted a senior director in a motorcycle manufacturer.

This admission by SIAM is the first official estimate of the kind of losses automakers have taken during the past two days of the final quarter of the last financial year. Earlier, Crisil Research had estimated that two-wheeler makers would take a loss of around Rs 480 crore due to the ban. Meanwhile, according to dealers, the worth of total BS-III inventory as on the date of the ban had been more than Rs 12,000 crore.

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