Tata Motor, Ashok Leyland, Mahindra left with over Rs 5,000 crore of unsold BS III vehicles

Despite the big attempts by automobile companies to liquidate the stock of Bharat Stage (BS) III vehicles during the last three days of March after the Supreme Court (SC) verdict banning them, there was still an unsold inventory of 1.2 vehicles worth Rs 5,000 crore, said the Society of Indian Automobile Manufacturers (SIAM).

A large majority of this over Rs 5,000 crore unsold inventory belongs to commercial vehicle (CV) manufacturers such as Tata Motors, Ashok Leyland and Mahindra & Mahindra as they have BS III inventory worth Rs 5,076 crore still unsold after April 1.

Also read: Post April 1 deadline nearly 50% BS-III vehicles remain unsold

“Despite heavy discount automaker stuck with 140,000 BS III vehicles. The total BS III compliant vehicles inventory valued at Rs 5,633 crore. Companies like Tata Motors, Ashok Leyland and Mahindra & Mahindra have the unsold inventory of Rs 5,076 crore. Two-wheeler manufacturing companies like Hero MotoCorp, Honda Motorcycle and TVS Motors together hold 78,638 BS III compliant vehicles costing around Rs 336 crore,” said Stewart &Mackertich Wealth Management report.

At 10:02 hours the shares of Tata Motors was trading down 2.23% or Rs 10.55, at Rs 462.20 per piece. Mahindra stocks were also down 0.90% or Rs 11.50, at Rs 1,270 per piece. Ashok Leyland shares were however trading up 0.61% or Rs 0.50, at Rs 82.90 per piece.

The SC decision to ban the sale of BS III compliant vehicles from April 1 onwards came as a big blow especially to those automobile companies that had a large unsold stock of them. This included largely two-wheelers and commercial vehicles. The total unsold BS III stock as of March 20 was 8.24 lakh vehicles which included 6.71 lakh two-wheelers, 96,700 commercial vehciles, 40,048 three-wheelers and 16,198 passenger vehicles, according to SIAM. This was stock was valued worth Rs 20,000 crore.

Automobile companies were forced to offer huge discounts on their vehicles ranging from Rs 24,000 for two-wheelers to over Rs 50,000 for commercial vehicles. SIAM's Director General Vishnu Mathur said due to this heavy discounting automobile companies faced a revenue loss of around Rs 1,200 crore in the last three days of March.

Sugato Sen, Deputy Director General of SIAM said that the first option of these companies is to export these vehicles to other markets, which some companies have already done. The second option is to bring back the vehicles from dealerships which were sent before the SC verdict and would be very expensive. He added that not all the vehicles can be made BS IV complaint by tweaking a few components and many companies are figuring out what to do with them.

Also read: Automobile companies may choose to export, refit unsold Rs 12000 crore BS III inventory

SIAM said that such heightened uncertainty in the business environment will affect investment in the automobile industry and such changed in the policy environment will affect profitability of OEMs.

Due to the high sales in March the sales of light commercial vehicles (LCVs) are expected to be weaker in the coming months and may impact the overall sales growth in FY18, SIAM said.

It also urged to the government to be clear regarding the BS VI norms which become mandatory for auto makers from April 2020, so that the same does not happen again