The ban on BS-III vehicles imposed by the Supreme Court will cost commercial vehicle and two-wheeler makers nearly “3,000 crore”, according to market research firm CRISIL.
The market researcher states that commercial vehicle makers disposed of over half their stock of BS-III vehicles before the Supreme Court-set April 1 deadline. However, it lists a how the order will adversely effect the commercial vehicle market:
* The commercial vehicle makers will incur a loss close to Rupees 2,500 crore due to the ban.
* The ban could also bring about a possible loss of Rupees 460-480 crores to the two-wheeler makers.
* The discounts and incentives on BS III vehicles sold till March 31, 2017, are expected to have cost them about 1,200 crore.
* The cost of disposing unsold inventory would amount to Rupees 1,300 crore.
* For Truck marker: The impact on the EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortization) margins of listed truck makers (Ashok Leyland and Tata Motors) will be around 2.5 per cent of their revenues.
* Staggered Impact: The impact would be staggered across FY17 and FY18, because the unsold inventory will have to be brought back from dealerships and then dealt with.
* Anticipation: Leading CV makers had continued manufacturing BS-III vehicles till March in anticipation of strong buying in the closing weeks of the fiscal, given price hikes of 8-10 per cent expected on BS-IV vehicles.
* The inventories: Move had bloated up inventories. When the Supreme Court ruling came, CV dealers’ inventory at risk was around 97,000 units (equivalent to 1.7 months of sales) valued at ”11,600 crore”.
* Sales: The industry is expected to have sold around 55 per cent of this in the last three days of March by offering discounts of 20-40% on the sticker price