Business Today

Pile-up Peril

Automakers are in a bind over unsold non-compliant inventory once BS-IV emission norms come into force from April 1.
By Chanchal Pal Chauhan   Delhi     Print Edition: March 26, 2017

From April 1, 2017, all new vehicles sold in India will have to comply with stringent Bharat Stage (BS) IV emission norms. Auto manufacturers have indicated that they are ready to cooperate despite the extra cost BS-IV compliant engines will entail. But what do they do with the BS-III compliant vehicles they already have and which will remain in stock after April 1?

The Society of Indian Automobile Manufacturers (SIAM) estimates that 25,000 passenger cars, 75,000 trucks and buses, 45,000 three-wheelers and 750,000 two wheelers are likely to be left over with manufacturers and dealers when the deadline is reached. This translates to one week of inventory for cars, six weeks for trucks and buses and three weeks for two and three wheelers.

The BS standards came into force from 2000, but every time they were tightened in the past - from BS-I to BS-II to BS-III - the Ministry of Road Transport and Highways (MoRTH) had permitted vehicles fulfilling earlier norms to continue being sold. But this time the MoRTH notification makes no reference to what should be done with the earlier inventory, while the Supreme Court appointed Environment Pollution (Prevention and Control) Authority has insisted that vehicles failing to comply with BS-IV norms should not be registered after the deadline.

No doubt the April 1 deadline had been set two years ago, allowing manufacturers ample time to phase out manufacture of vehicles conforming to earlier standards. Indeed, a number of them, including Maruti Suzuki, Hyundai Motor and Honda Car India have been supplying BS-IV compliant vehicles in the 10 biggest Indian cities - which account for 50 per cent of total passenger vehicles' sale - since April 2010, when BS-IV compliant fuel was first made available. But with the norms being extended across the country, the government's inflexible stance is causing worry.

"We have not sought any relaxation of the deadline and are ready to comply with it fully," says Vishnu Mathur, Director General, SIAM. "We only want an extension to dispose off existing stock manufactured before April 1." Leading vehicle manufacturers agree. "The world over, emission norms are set by manufacturing date and are not concerned with when the vehicle is sold or delivered," says Pawan Goenka, Director, Mahindra & Mahindra. The ministry has convened a meeting of all stakeholders on March 20 to discuss the matter.

Will the price escalation following the use of BS-IV compliant engines impact sales? Industry watchers maintain that commercial vehicles, as well as two and three wheelers, which are all price sensitive, are likely to be more affected than passenger cars. But given the deteriorating air quality in areas like the National Capital Region, stringent standards are unavoidable. Indeed, MoRTH minister Nitin Gadkari has already stated that he intends to skip the next stage of BS-V and impose BS-VI standards directly from 2020, which will bring Indian emission standards on par with those of the West. ~


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