The Supreme Court has announced its final order into the matter concerning sale of vehicles compliant to BS III emission norms. The court has banned the sale and registration of vehicles that do not comply with Bharat Stage IV emission norms. The commercial vehicles and the two-wheeler segment which has the largest unsold inventory of BS III vehiclesin the Automobile industry, will have to adhere to BS IV emission norms across the country from April 2017 onwards.BS-IV vehicles have 80 percent less Particulate Matter (PM) and 50 percent less NOx (Nitric Oxide) emissions according to research findings.
The Automobile Original Equipment Manufacturers (OEMs) are holding a stock of 8,24,275 BS-III vehicles, which includes 96,724 commercial vehicles, 6,71,308 two-wheelers, 40,048 three-wheelers and 16,198 cars. As a result, many companies such as Hero MotoCorp, Tata Motors, Mahindra, TVS Motor, Ashok Leyland and Honda Motorcycle and Scooter India (HMSI) combined together are left with that stock.
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 off the existing stock of such vehicles.
Bharat Stage emission standards, introduced in 2000, are emission standards that have been set up by the Central government to regulate the output of air pollutants from internal combustion engine equipment, including motor vehicles. The different norms are brought into force in accordance with the timeline and standards set up by the Central Pollution Control Board which comes under the Ministry of Environment and Forests and Climate Change.
The Bharat Stage norms are based on European regulations. In 13 major cities, Bharat Stage IV emission standards were put in place in April 2010. BS-IV norms were supposed to come into effect nationwide from April 2017.
The auto companies have been manufacturing BS-IV compliant passenger vehicles and commercial vehicles since 2010. Implementation of BS-IV norms pan-India had been delayed due to non-availability of BS-IV fuel across the country, forcing some categories of four-wheeled vehicles to remain at the BS-III stage till 1 April 2017.
Hero MotoCorp indicated that the company stands to face a loss of approximately Rs.16 billion if the court bans sale of BSIII compliant vehicles from 1st April 2017. Tata Motors and Ashok Leyland also have a large unsold inventory of BS III compliant Commercial Vehicles. Ashok Leyland has indicated that they would be able to export the unsold inventory to other markets where they have significant presence and still operate on BS III norms and for any other vehicles still leftover, the Company confirms that it will be able to easily upgrade them to BS IV at minimal cost.
On the other hand, Bajaj Auto, Maruti Suzuki, Toyota and Hyundai have completely phased out manufacturing of BS III compliant vehicles and there is no unsold inventory for the them.Car market leader Maruti Suzuki is least affected by the order and has been making BS IV vehicles since 2010.
The BS-IV standard will bring much needed improvements in terms of air quality, to the benefit of the people and the environment. The Companies who are still expecting losses due to the decision of the Supreme Court will have to henceforth become proactive to generate value for shareholders.