After Supreme Court on Wednesday imposed a ban on sale of BS-III vehicles from April 1 when the Bharat Stage (BS)-IV emission norms for vehicles come in force, automobile companies body SIAM said it would abide by the order of the apex court but at the same time found it quite frustrating.
“Auto Industry is law abiding and is in full compliance with the emission norms set by Government that stipulates date of manufacturing,” said SIAM President Vinod Dasari.
Stating that as per Government notification, sales of BS III vehicles were allowed after April 1, he said, “Now suddenly those BS III vehicles are banned. I find it quite frustrating that something like this happens.”
Post Supreme Court decision auto stocks fell by up to 3 per cent. While shares of Hero MotoCorp went down by 3.15 per cent, Ashok leyland lost 2.78 per cent, Bharat Forge (1.30 per cent), Tata Motors (0.70 per cent), Mahindra & Mahindra (0.66 per cent) and Maruti Suzuki (0.58 per cent) on BSE.
SIAM said while auto industry has had the capability of making BS4 vehicles since 2010, but lack of proper BS4 fuel prevented it from selling such vehicles, nationwide. Running a BS4 vehicle with BS3 fuel can cause severe problems to some vehicles.
“While no one pushed for BS4 fuel availability for 7 years to change over faster, this sudden decision – just a few days before the changeover - is rather unfortunate as it causes undue stress on the entire industry, and causes loss of jobs. Auto industry, anywhere in the world, requires a stable and predictable policy which allows for long term planning and investments,” added Dasari.
The auto emission norms are emission standards which are adopted to check the air pollutants released from any internal combustion engine equipment, including motor vehicles. According to industry estimates, the total value of the impacted vehicles is between Rs15,000 and Rs20,000 crore.
The SIAM had earlier informed the apex court that companies were holding stock of around 8.24 lakh vehicles, which are not BS-IV compliant, including 96,000 commercial vehicles, over six lakh two-wheelers and around 40,000 three-wheelers.
The manufacturers had argued that sale and registration of vehicles, which are not BS-IV compliant, should not be prohibited from April 1 and that they would not manufacture any vehicle not complying with BS-IV emission norms from April 1. The firms had argued that they may be given a reasonable time to dispose of the existing stock of such vehicles.
Observing that health of the people is “far, far more important” than the commercial interests of the manufacturers, the apex court observed that automobile firms have declined to take “sufficient pro-active steps” despite being fully aware that they would be required to manufacture only BS-IV compliant vehicles from April 1, 2017.
The court in its five-page order also prohibited registration of vehicles, which do not meet Bharat Stage-IV emission standards, from April 1 except on a proof that such a vehicle was sold on or before March 31.
Country’s largest two wheeler maker Hero MotoCorp said it carefully planned a proactive move to switch from BS III to BS IV compliant products across all its range well in time and have been producing only BS IV compliant products since one month before the given deadline.
“We have reduced our inventory significantly in the past few months with the aim to minimise our stakeholder losses. However, environmental protection will take precedence over temporary financial benefits,” Hero MotoCorp Chairman , Managing Director and CEO Pawan Munjal said.
Supporting the Supreme Court order, Daimler India Commercial Vehicles Managing Director and CEO Erich Nesselhauf said: “Today’s decision of the Supreme Court reassures us in our belief that industry interests must go together with the interests of the society at large.”
The BS-IV standard will bring much needed improvements in terms of air quality, to the benefit of the people and the environment, he added.
“At BharatBenz, we had made the strategic decision last year to only focus on BS-IV vehicles...Consequently, we gradually phased out BS-III in our business system and have made the switch to produce only BS-IV vehicles in March, exactly according to plan,” Nesselhauf said.
Bajaj Auto Managing Director Rajiv Bajaj said: “There are some things on which you can’t put a price. This is for the future of our children. This is a matter of principle.”
Although the notification says “production, not sales from April 1”, but “you have to read what is unwritten”, he said.
Similarly, Toyota Kirloskar Motor Vice-Chairman Vikram Kirloskar said: “We have to go towards meeting global standards of emission and safety, and that is the only way forward.”
Toyota Kirloskar stopped manufacturing of BS III vehicles more than a year ago and all its vehicles currently being sold in India are BS IV compliant.
Two-wheeler maker Honda Motorcycle and Scooter India said: “We respect the honourable Supreme Court’s decision and confirm that all our products comply with BSIV norms.”
Car market leader Maruti Suzuki is least affected by the order and has been making BS IV vehicles since 2010. Hyundai Motor India said it respects the court’s decision and confirmed that all its products complied with BS IV norms.
Commenting on the implications of the order, EY Partner and automotive sector leader Rakesh Batra said: “The Supreme Court decision will result in difficulties for the entire automotive value chain, on top of cost increases to comply with BSIV vehicle production and GST implementation.”
This industry works globally on 20 to 30 days inventory within the distribution channel and this should have considered as part of the transition plan when migrating from BS III to BS IV, he added.
Credit rating agency ICRA said that CV segment will be the most impacted on account of sizeable inventory levels and due to potential costs associated with inventory re-call from dealers and upgradation to BS-IV norms.
But Ashok leyland said it has been making BS IV vehicles since 2010 and has sufficient capability and capacity to make BS IV vehicles. “However, since BS IV Commercial Vehicles cannot run properly on BS III fuel – and such fuel is not available nationwide - our customers continued to buy BS III vehicles,” said Ashok leyland MD and CEO Vinod K Dasari.
Saying Ashok leyland would have minimal impact, Dasari said, “Given the current demand, majority of the vehicles in the pipeline have already been sold. Some more will be sold in the next couple of days where we have customer orders.
“Of the little inventory that we expect to remain beyond this, we will export them to other markets where we have significant presence and still operate on BS III norms.
Finally, for any other vehicles still leftover, the Company confirms that it will be able to easily upgrade them to BS IV at minimal cost,” he added.