Commercial vehicle (CV) manufacturers could be sitting on an inventory of Rs 4,600-5,800 crore, following the Supreme Court’s decision to ban sale of BS-III vehicles from April 1, 2017, and clearing it could take up to two quarters, according to a report.
“CV OEMs are now sitting on sizeable stock of unsold inventory, which is worth approximately Rs 4,600-5,800 crore. We believe exports of these vehicles to near-by markets where emission norms have still not progressed to Euro-IV or equivalent appears to be the most suitable option available with OEMs as upgradation to BS-IV has limited possibility,” Icra said.
Given the sizeable level of unsold inventory levels (almost 30-40% of India’s CV Exports —around 1,10,000 units), clearing up the inventory could take up to two quarters depending on the model mix and inventory ageing. This will result in higher working capital intensity over the next few quarters.
According to industry estimates, the CV industry had approximately 95,000 BS-III vehicles in March 2017, of which they were able to clear only 50,000-60,000 units (or 55-65%) in the last two days of fiscal 2017.
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