BS III vehicle ban: effect on Hero MotoCorp, Tata Motors and Ashok Leyland

On Wednesday March 29, 2017, the Supreme Court has finally imposed ban on sale of BS III vehicles, and bharat stage (BS)-IV emission norms for vehicles will come into force. The court also clarified that no new registrations will be allowed of BS-III vehicles after March 31.

However, vehicles can be sold prior to this date. It was expected that number of BS III vehicles in the pipeline was around 8,24000, and value for the unsold vehicles was approximately Rs 12000 crore. And it was expected to have negative impact on industry. In this article we have tried to analyze level of impact this will have on these 3 companies who are said to be majorly impacted by BS III vehicle ban.

1)Hero MotoCorp

2)Tata Motors

3) Ashok Leyland

Hero MotoCorp

From 600000 of unsold BS III two wheelers in industry, 249000 vehicles were of Hero MotoCorp. Due to which, reports say, it will have huge impact on the Company, but the real situation is different. If we compare yearly numbers of sales of vehicles of company we will see that Hero MotoCorp produces approximately 60 million units of vehicles a year, that means an average of 600000 units sold per month, and now if we compare 249000 units to FY16 sale of 60 million, it is only 15 days of unsold inventory. As per latest news Hero MotoCorp has already sold 2/3rd of inventory, that means it is only left with inventory of 80000 units, which is barely equals to 5 days of outstanding inventory.

Tata Motors

Next comes Tata Motors, which is expected to have 43000 units of total 90000 units of Outstanding CV and HCM vehicles in auto industry. As per the reports, it is the second company in list which will be majorly impacted by BS III vehicle ban. Company said that it will convert those BS III vehicles into BS IV; and some will be exported. Tata Motors has 30 days of inventory of BS III vehicles which may have some impact on sales figures.

Ashok Leyland

It was expected that Ashok Leyland was having around 30%-40% of total BS III outstanding inventories of CV & HCV in market. But the management recently stated that they have very negligible units of inventory, and some of them will be converted to BS IV standard, while rest will be exported.

Overall, we don’t see much impact on the companies due to BS III vehicle ban.