Following a freeze on registration and sale of new BS-III compliant vehicles from April 1, the automobile industry on Wednesday termed the development as “unfortunate” and warned of job losses in the industry.
Such a “last minute decision,” according to analysts is likely push OEMs to explore the option of exporting the over 8 lakh affected vehicles, to markets where emission norms have not progressed to Euro IV or equivalent.
Stating that the industry would abide with the orders passed by the Supreme Court, Vinod K. Dasari, President of Society of Indian Automobile Manufacturers pointed out that auto industry has been ready with BS IV manufacturing since 2010.
However, the sale of BS IV vehicles nationwide was not possible due to lack of BS IV fuel. “Running a BS4 vehicle with BS3 fuel can cause severe problems to some vehicles,” he said in a statement.
“While no one pushed for BS IV fuel availability for seven 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 cause loss of jobs,” Mr. Dasari said. The automobile industry, anywhere in the world, requires a stable and predictable policy which allows for long term planning and investments, he said.
Mr. Dasari, who is also the MD and CEO of Ashok Leyland, said the auto industry has been seeking “for years” a ban on older vehicles to cut pollution.
‘Minimal impact’
Mr. Dasari said Ashok Leyland would be able to upgrade the leftover BS III vehicles at minimal additional cost. He denied reports that the firm had to take a huge writeoff of BS-III inventory due to the impending ban. “In fact, the impact will be minimal for us.”
“The commercial vehicle segment will be the most impacted on account of sizeable inventory levels, potential costs associated with inventory re-call (from dealers) and upgradation to BS-IV norms,” Subrata Ray, Group Vice President, Corporate Sector ratings at ICRA said. “Further, in order to liquidate existing stock, commercial vehicle OEMs will also be pushed to offer higher discounts, which continue to be at elevated levels for the past few years.”
Rakesh Batra, Partner and automotive sector leader at EY said the 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 .... and this should have considered as part of the transition plan when migrating from BS III to BS IV. Unfortunately a last-minute decision does not help any of the industry stakeholders or consumers, in March when volumes are higher due to year-end purchases and deals,” Mr. Batra said.
