Two-wheeler cos need more time to sell BS III inventory

The Supreme Court order to ban the sale of BS III vehicles from April 1, 2017, has become a challenge as automakers, especially two-wheeler companies, are scrambling to liquidate existing stocks before the said deadline.

Over eight lakh vehicles worth Rs 20,000 crore would be hit by the ban. According to industry estimates, the total value of the impacted vehicles is between Rs 15,000 crore and  Rs 20,000 crore. Around 6.71 lakh two-wheelers, 97,000 commercial vehicles, and over 40,000 three-wheelers would be affected by the ban.

Industry is bracing itself for this impact, arriving at quick solutions to clear stocks, and also garner sales. A TVS Motor Company spokesperson said, “It is difficult to sell all existing stocks in two days. Efforts are on to clear the inventory. We are offering ‘unprecedented’ discounts from Rs 5,000 to Rs 15,000 on different models.”

Industry sources said that as on March 20, out of the six lakh BS III two-wheeler units, three lakh belong to one of the largest two-wheeler manufacturers. “Owing to the festive season, the inventory has come down to one-third. The company is also offering huge discounts ranging from Rs 5,000 to Rs 12,000,” a person close to the development said.

However, all companies are keeping fingers crossed on what happens after April 1, 2017. Abdul Majeed, Partner at Price Waterhouse and an auto expert, said, “The two-wheeler industry is facing a big challenge, because a major chunk of 6.7 lakh units is contributed by the segment, especially from rural pockets. The whole industry was divided on switching to BS IV-compliant products.”

Majeed suggested that the companies can look at options of exporting to countries which are BS III-compliant. “Secondly, by recalling units and refitting them with BS IV-compliant engines, I doubt customers will accept it,” he added.

In a statement, SIAM (Society of Indian Automobile Manufacturers) said, “We are urging the Supreme Court to give some time at least to do away with the inventory that these companies were sitting on for BS III-compliant vehicles.”

Encouraging the move, Hero MotoCorp MD and CEO Pawan Munjal said, “I welcome this move by the Supreme Court in the interest of public health. Hero MotoCorp, recognising the need of the hour, carefully planned a proactive move to switch from BS III- to BS IV-compliant products across our range well in time, and have been producing only BS IV-compliant products since one month before the given deadline... Environmental protection will take precedence over temporary financial benefits.” Hero claims to have reduced its BS III inventory significantly in the past few months with the aim to minimise stakeholder losses.