Crisil Research reveals BS-III ban is about to impact the truck makers in the country heavily; loss would be staggered across fiscals 2017 and 2018
The ban on BS III compliant vehicles across India has impacted the entire auto industry heavily. While the two-wheeler manufacturers have managed to clear out a large number of their stocks in two days with huge discount and other cash benefits, the truck manufacturers are about to face a cost of around Rs. 2,500 crore because of the ban. Crisil Research reveals that the impact on the CV makers would be staggered across fiscals 2017 and 2018.
Like the rest of the manufacturers in the Indian auto industry the commercial vehicle makers too offered discount and cash benefits in an attempt to reduce their stock of the BS III compliant vehicles. The research shows that due to the discount and cash benefits the CV makers have to bear around Rs. 2,500 crore. The companies will have to be brought back the unsold inventory from the dealerships, which will lead them shelling a hefty amount.
The ban would directly impact the pricing of the BS IV vehicles as well, as the companies will try to compensate their loss with greater profit by selling the new BS IV vehicles. However, the CV makers were able to clear out over half of their stock of BS III compliant vehicles by offering incentives. Despite the ban looming over the head of the auto manufacturers, the CV makers had continued producing BS III vehicles in March too, anticipating strong buying in the last weeks of the last fiscal year.
While around 97,000 units of commercial vehicles valuing Rs. 11,600 crore were lying in the stock when the Apex court ruling came, more than half of that were sold by the end of 31st March. That means around 40,000 – 45,000 units of unsold inventory will be returning to the companies from dealerships. While some of the vehicles would be upgraded to BS IV, some will be dismantled for spares.
Speaking about the three-wheeler manufacturers like TVS, Piaggio, they are expected to face a marginal hit, as their BS III inventory couldn’t be cleared because of limited number of permits. On the other hand, Bajaj survived the impact as it had already leaped to BS IV.
Source: ET Auto