With Rs 5,000 crore worth of BS- III vehicles remaining unsold after the Supreme Court banned them, auto industry body SIAM on Tuesday said an increasingly uncertain business environment will affect investments in the sector.
The apex court had banned sale and registration of BS-III vehicles from April 1, affecting a total of over 8 lakh vehicles worth up to Rs 20,000 crore.
“Currently, there are around 1.2 lakh units of BS-III vehicle inventory worth around Rs 5,000 crore. Most of them are lying with the dealers,” Society of Indian Automobile Manufacturers (SIAM) Director General Vishnu Mathur told reporters here.
He said automobile companies, mostly the two-wheeler manufacturers, had managed to liquidate a large chunk of the BS-III inventory by offering huge discounts.
“The revenue loss of the industry due to discounts, mostly by the two-wheeler makers, are to the tune of Rs 1,200 crore,” Mathur said.
SIAM had maintained that according to government notification, sales of BS III vehicles were allowed after April 1 and only manufacturing was not allowed. The apex court, however, ruled otherwise and ordered a blanket ban citing public health concerns.
Highlighting ‘uncertain’ business environment surrounding the automobile industry, Mathur said: “This is the second time it has happened, that too in quick succession.”
The first was the eight-month ban on big diesel cars and SUVs with engines of 2,000 cc and above in Delhi-NCR by the Supreme Court that was lifted in August last year. The apex court imposed 1 per cent of the ex-showroom price of such vehicles as green cess.
“This was something which the industry never expected, something that doesn’t happen anywhere else in the world,” he said.
Commenting on the implications of such developments, SIAM Deputy Director General Sugato Sen said: “The increasing uncertainty due to uncertain business environment will affect investments in auto industry.”
The abrupt policy changes continue to affect long term sustainable growth of industry, he added.
One of the key concerns for the auto industry is that the ad-hoc changes in policy environment would affect profitability of OEMs, Sen said.
When asked what would happen to the BS-III vehicles, Mathur said: “It will be up to the individual companies now to decide what they would like to do, although some of them have said an option would be to export.”
Source: Business Standards