BS (III) TO MAKE WAY OR BS (IV) AND COMPANIES CRY FOUL

By Ruma Dubey

As the swanky new fiscal, FY18 begins day after tomorrow, 1^st April, the auto industry in India are literally choking on their own smoke.

There was a lot of confusion on the Bharat Stage (III) emission standards. This BS standards are stipulated by the Govt  to regulate air pollutants from internal combustion of engines, especially vehicles. This is based on the European regulations.

This current BS (III) norms came into effect in 2010 and starting 1^st April, 2017, it will be banned and vehicles have to comply with the next level, BS (IV) norms. Actually, some 13 cities across India are already onto the BS(IV) norms.

It is not as though the car companies did not know this was coming. They were forewarned and knew that norms will change in fiscal FY18. Yet, they continued to manufacture as per BS (III) norms. They were very firm in their belief that the ban will come only on sale of new vehicles from 1^st April but not registered – vehicles that are already made and dispatched to the dealers. But Supreme Court yesterday, did just that – it banned sale as well as registration of all vehicles which are not BS (IV) compliant from 1^st April.

The auto industry was very certain that either the date could get moved ahead or the ban will not come on registration. This optimism probably stemmed from the fact that they all are sitting on a pile of huge inventory of unsold cars, all BS(III) – around 8 lakh vehicles and the Govt was actually backing up the industry.

What the SC did what was right – this was not new news. There should have been no confusion at all as this was already very known, that both sale and registration will be banned. To now cry foul is just unfair. The companies did not move fast enough to change their production tracks to match the BS (IV) norms, so how can anyone else be blamed for the pile up of inventory?

The news is that the auto sector is sitting on a huge inventory worth almost Rs.12,000 crore. Ashok Leyland, Mahindra &Mahindra, Tata Motors, Hero MotoCorp and TVS – all are going to face an uphill task after this ban. The dealers are also none too happy as they are left holding unsold inventory and that means more costs, which in turn could means defaults on bank loans, which they would have taken to buy the stocks.

Hero Moto is stated to be sitting on the highest inventory – 290,000 vehicles while Bajaj Auto is sitting on much lesser inventory. Hero will be in a tight spot as it cannot export off much while Bajaj has a lot of exports and will be able to clear off most of the inventory.  

In the four-wheeler segment, M&M and Ashok Leyland will be more hard hit as they have a lot of stock in 4 as well as 3-wheelers, trucks under the banned BS(III) category. Analysts say that Tata Motors also has inventory but in the consolidated performance, which is what matters today, this might not have too much of an impact.  

What is noteworthy here is that Maruti followed the rules. It knew that the ban date is approaching fast and it had started preparations long time ago – ahead of time, all its vehicles are already BS(IV) compliant.

Thus if Maruti, which is the largest car maker in India could adapt and start preparing so much ahead of time, why did the other companies not take this seriously enough? This attitude of “chalta hai” is what irks; today if they has taken necessary steps, this pile up of inventory and raving and ranting against the “unfair” SC order would not have happened.

We need to do this for the environment; everything cannot be always about development and money all the time.