Supreme Court bans sale of BS-III vehicles from April 1

The court said health concerns of citizens took precedence over any financial losses for companies

Ajay Modi  |  New Delhi 

Heavy traffic moves along a busy road during a power-cut at the traffic light junctions in New Delhi

The Supreme Court on Wednesday imposed a ban on sales and registration of all vehicles not conforming to Bharat Stage (BS) IV emission norms from April 1. The decision leaves automobile makers, primarily Tata Motors, Ashok Leyland, M&M and Hero, with large unsold stocks (BS III vehicles) worth Rs 8,000-9,000 crore when the month ends. 

This is the second major blow to the industry from the apex court in the last 15 months. In December 2015, the court had imposed a complete ban on sales of diesel vehicles with an engine of 2,000 cc and above in the NCR. The ban, which primarily impacted Toyota and Mercedes, was lifted in August last year.

Today’s decision will impact many more companies. Other impacted companies are SML Isuzu, VECV and Honda Motorcycle and Scooter India. At the end of the month, companies along with their dealers might be left with an unsold inventory of 7,00,000-8,00,000 BS III vehicles, mostly two-wheelers and commercial vehicles. “The number of such vehicles may be small compared to the overall number of vehicles in the country but the health of the people is far, far more important than the commercial interests of the manufacturers or the loss that they are likely to suffer in respect of the so-called small number of such vehicles,” the court said in its order. 

It clarified that only those vehicles sold on or before March 31, 2017 can be registered from April 1 only in case of a proof. Companies were seeking time beyond April 1 to dispose off the existing stock. 

Share prices of many automakers reacted to this decision. Hero MotoCorp, country’s biggest two-wheeler maker, saw its stock slip more than three per cent to Rs 3,223 at the BSE. Ashok Leyland’s share price declined 2.78 per cent to Rs 84. Force Motors’ share declined 1.84 per cent to Rs 4,516 and SML Isuzu slipped 1.64 per cent to Rs 1,233. Stocks of companies that are less or not impacted at all remained in the green. Bajaj Auto’s stock closed at Rs 2,831, up 0.29 per cent. Bajaj may be left with small quantity of BS-III two wheelers at the end of this month. S Ravikumar, president (Business Development) at the company told Business Standard that one of the options before the company is to take back the unsold stocks from dealerships and divert to export markets. "We are the largest exporter of two-wheelers from India. So, that should not be an issue."    

The court said that manufacturers were fully aware of the BS-IV timeline but for ‘reasons that are not clear’ they chose to ‘sit back’ and did not take ‘pro-active steps’. The court said major car makers such as Maruti Suzuki completely shifted to manufacturing of BS-IV vehicles a few years ago. It criticised the rest of the industry for not doing so even though they had the technology and know-how. 

Supreme Court bans sale of BS-III vehicles from April 1

The court said health concerns of citizens took precedence over any financial losses for companies

The court said health concerns of citizens took precedence over any financial losses for companies
The Supreme Court on Wednesday imposed a ban on sales and registration of all vehicles not conforming to Bharat Stage (BS) IV emission norms from April 1. The decision leaves automobile makers, primarily Tata Motors, Ashok Leyland, M&M and Hero, with large unsold stocks (BS III vehicles) worth Rs 8,000-9,000 crore when the month ends. 

This is the second major blow to the industry from the apex court in the last 15 months. In December 2015, the court had imposed a complete ban on sales of diesel vehicles with an engine of 2,000 cc and above in the NCR. The ban, which primarily impacted Toyota and Mercedes, was lifted in August last year.

Today’s decision will impact many more companies. Other impacted companies are SML Isuzu, VECV and Honda Motorcycle and Scooter India. At the end of the month, companies along with their dealers might be left with an unsold inventory of 7,00,000-8,00,000 BS III vehicles, mostly two-wheelers and commercial vehicles. “The number of such vehicles may be small compared to the overall number of vehicles in the country but the health of the people is far, far more important than the commercial interests of the manufacturers or the loss that they are likely to suffer in respect of the so-called small number of such vehicles,” the court said in its order. 

It clarified that only those vehicles sold on or before March 31, 2017 can be registered from April 1 only in case of a proof. Companies were seeking time beyond April 1 to dispose off the existing stock. 

Share prices of many automakers reacted to this decision. Hero MotoCorp, country’s biggest two-wheeler maker, saw its stock slip more than three per cent to Rs 3,223 at the BSE. Ashok Leyland’s share price declined 2.78 per cent to Rs 84. Force Motors’ share declined 1.84 per cent to Rs 4,516 and SML Isuzu slipped 1.64 per cent to Rs 1,233. Stocks of companies that are less or not impacted at all remained in the green. Bajaj Auto’s stock closed at Rs 2,831, up 0.29 per cent. Bajaj may be left with small quantity of BS-III two wheelers at the end of this month. S Ravikumar, president (Business Development) at the company told Business Standard that one of the options before the company is to take back the unsold stocks from dealerships and divert to export markets. "We are the largest exporter of two-wheelers from India. So, that should not be an issue."    

The court said that manufacturers were fully aware of the BS-IV timeline but for ‘reasons that are not clear’ they chose to ‘sit back’ and did not take ‘pro-active steps’. The court said major car makers such as Maruti Suzuki completely shifted to manufacturing of BS-IV vehicles a few years ago. It criticised the rest of the industry for not doing so even though they had the technology and know-how. 
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