Commercial vehicle manufacturers bear brunt of BS-III ban, loss estimated to be Rs.2,500 crore

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The Supreme Court’s decision to ban the sale and registration of BS-III compliant vehicles from April 1 has hit the industry hard, with a report by CRISIL estimating the loss at Rs.3,000 crore. Commercial Vehicle (CV) manufacturers were the hardest hit, with their losses surmounting to Rs.2,500 crore according to the report.

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Commercial vehicle manufacturers like Tata will have to find ways to get rid of existing inventory

Two-wheeler companies might see losses to the tune of Rs.500 crore on account of the ban. The primary reason for losses is the inability of manufacturers to sell existing inventory. Industry experts are of the opinion that there are close to 45,000 unsold commercial vehicles in the country.

Showrooms offered huge discounts in the aftermath of the Supreme Court verdict, aiming to dispose their inventory. While they managed to sell most of the two-wheeler inventory, commercial vehicles weren’t as lucky. Discounts ranged between 20-40 per cent during the last three days of the month.

Most manufacturers were aware of the move to migrate to BS-IV norms, but chose to produce vehicles even in March. The Supreme Court directive, which caught them unawares will have a key repercussion on their profits for the year.

Discounts offered on two-wheelers during the last few days of March stand close to Rs.600 crore, with manufacturers bearing around 80 per cent burden. Dealers will also stand to lose a good deal, having to bear the remaining brunt.

Manufacturers will also have to deal with unsold inventory, either upgrading them, using them for spare parts, or exporting them to different regions. This is expected to burn a hole of Rs.1,300 crore. The discounts offered add up to around Rs.1,200 crore, taking the total financial burden to Rs.2,500 crore.

The Supreme Court banned the sale and registration of BS-III vehicles keeping increasing pollution and the health of residents in mind.

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