Ban on BS-III vehicles: ICRA suggests solution for manufacturers
New Delhi : Export of unsold BS-III commercial vehicles is the most suitable option for the manufacturers with a sizeable inventory following the Supreme Court ban on sale and registration of these vehicles after April 1, 2017, rating agency ICRA said on Friday.
"CV (commercial vehicle) OEMs (original equipment manufacturers) are now sitting on sizeable stock of unsold inventory, which is worth approximately Rs 46-58 billion," the rating agency said in a report.
"We believe exports of these vehicles to nearby markets where emission norms have still not progressed to Euro-IV or equivalent appears to be the most suitable option available with OEMs as upgradation to BS-IV has limited possibility."
The report said the technology to meet BS-IV norms has undergone a significant shift. In case of CVs, the engines technology has moved from largely mechanical to electro-mechanical.
"Apart from changes in engine technology, the exhaust system has also been upgraded to either exhaust gas re-circulation (EGR) or selective catalytic reduction (SCR) technology to achieve higher reduction in Nox levels under BS-IV," the report said.
In a setback to the automobile industry, the Supreme Court ban on the sale and registration of BS-III vehicles just two days prior to the implementation of new emission norms on April 1 resulted in the sizeable stock of BS-III vehicles lying unsold.
Besides, there was a sharp contraction in earnings on account of deep discounts extended to clear existing inventory and costs associated with re-calls and possible upgradation to BS-IV norms.
"According to industry estimates, the CV industry had approximately 95,000 BS-III vehicles in March 2017, of which they were able to clear only 50,000-60,000 units (or 55-65 per cent) in the last two days of the fiscal 2017 despite sharp increase in discounts (ranging between 10-30 per cent) offered by OEMs as well as dealers," the report added.