Supreme Court bans sales of BS III vehicles from April 1

The Supreme Court (SC) on Wednesday banned the sale of Bharat Stage (BS) III vehicles from April 1 onwards. The apex court passed the judgment that vehicles not compliant with BS IV norms will not be sold from April 1.

The SC further said that manufactures were fully aware of the April 1 deadline in advance, according to a Bloomberg alert.

This comes as a major blow to many automobile manufacturers who have a large unsold inventory of BS III vehicles.

The worst affected were Hero MotoCorp whose shares plunged down nearly 3% (2.97%) or Rs 99 at Rs 3,229.05 at 14.23 hours on BSE, while Ashok Leyland shares were down 2.89% or Rs 2.50 at Rs 83.95 per piece. The S&P BSE Auto market was down 0.50% or 111.15 points at 21,907.78 points.

The Government on Monday told the apex court that it agrees with the interpretation of automakers that April 1, 2017 is a deadline to stop production of BSIII vehicles and not sale.

Automakers told the court that a similar approach was accepted in 2005 and 2010 with earlier versions of BS stages. 

The reason for them to express their displeasure is the cost of changing to the new technology. 

This has resulted in rise in costs of their vehicles in comparison to BS III vehicles. For instance, Bajaj Auto vehicles rose between Rs 1,000 to Rs 7,000. A reason for Bajaj to voice disapproval as any extension of the deadline by the government would lead to its competitors with BS-III models benefiting from the price advantage in the market.

Hero MotoCorp's lawyer on Tuesday told the court the two-wheeler stands to lose Rs 1,600 crore if SC bans sales of these vehicles.

Two-wheelers have the highest inventory of BS III vehicles of over 6 lakh vehicles, followed by 96,000 commercial vehicles and around 40,000 three-wheelers, according to SIAM figures submitted to SC.

Further, Abhishek Manu Singhvi, lawyer for the Society of India Automobile Manufacturers (SIAM), informed court that companies will have to destroy BS III vehicles or sell those in distress if their sale is banned by court. He said that 6-8 months is needed to exhaust existing inventory of BS III vehicles.

Tata Motors, Honda, Yamaha and dealers’ body have all been opposed to the ban on sale of BS III vehicles post-March.

However, two-wheeler manufacturer Bajaj Auto has been against the move of giving automobile companies an extension of the deadline of BS IV emission norms.

The company has already completed the BS IV transition for all its vehicles. Bajaj Auto's MD Rajiv Bajaj has openly criticised the move by players in the market to persuade the government to extend the deadline. It also asked SIAM to exclude it from a letter to PM Modi asking for an extension in the deadline.

In fact the company has been even requested the apex court to uphold the March 31 deadline and even suggests imposing hefty fines on those manufacturers selling BS III vehicles after the deadline.

It is not only Bajaj Auto that have expressed their displeasure regarding an extension in the BS IV deadline. Daimler India, Managing Director and CEO, Erich Nesselhauf was unhappy with talk on extension for the BS IV implementation. “Continuing discussions on BS-IV are reflecting obvious attempts of some players in the Indian commercial vehicle industry to dilute this upcoming transition of emissions standards,” he said in a statement in February.