CHENNAI: The impact of the Supreme Court ruling on the automobile firms that got stuck with BS-III inventory on April 1 is likely to be around Rs 3,000 crore, says market research firm Crisil Research.
Commercial vehicle-makers alone are expected to take a hit of Rs 2,500 crore.
Two-wheeler makers, on the other hand, will be facing a loss of Rs 480 crore.
While commercial vehicle players stand to take the worst hit, the report estimates that they have disposed of over half their stock of BS-III vehicles before the Supreme Court-set April 1, 2017, deadline. On the rest, the discounts and incentives on vehicles for vehicles they sold during the last few days of March are
expected to cost them about Rs 1,200 crore. “Additionally, Rs 1,300 crore would be incurred to dispose of the unsold inventory,” Crisil Research said.
Profit margins will be directly impacted, with the Ebitda margins of listed truck makers (Ashok Leyland and Tata Motors’ standalone) at around 2.5 per cent of their revenues, it added.
However, this impact will be stretched out as it takes significant time to bring back inventory with dealers, and then deal with them. Aiding them, in the last few days was the impending price hikes set to take effect from April 1. When the Supreme Court gave its verdict, commercial vehicle dealers’ inventory at risk was around 97,000 units (equivalent to 1.7 months of sales) valued at Rs 11,600 crore.
However, half of this is estimated to have been sold in the last three days of March. Manufacturers were offering discounts of 20 per cent to 40 per cent on the sticker price compared with around 10 per cent before the ruling. Out of additional discounts and incentives, manufacturers are likely to bear 80 per cent.
The remaining unsold inventory of around 45,000 units would take five or six months to be dealt with, Crisil said. On the two-wheeler front, inventory at risk had been 670,000 units, amounting to Rs 3,800 crore.