Auto manufacturers caught flat-footed by SC ban

In a move to curb India’s dire air pollution, the Supreme Court banned the sale and registration of all vehicles that did not meet up to date emissions standards, effective April 1, 2017.

The Bharat Stage emission standards (BS), which the government uses to regulate pollution caused by motor vehicle emissions and other combustion engines, will bring India in line with European environmental standards.

The April 1 deadline was set last year for all vehicles sold to comply with these new norms and move to the newer, cleaner engines. This was to ensure toxic vehicles that meet older BS standards (BS-III and lower) would no longer be produced and no excess inventory would pile up.

The Environment Pollution Prevention and Control Authority had also fired off a warning in October of last year that auto manufacturers should hasten the sale of non-BS-IV vehicles by the deadline.

s or be dismantled for parts.

Impact on auto stocks

In the latest market news, auto stocks tanked by up to 3% after the Supreme Court announced the ban. Some of the biggest losers were Bharat Forge, down 1.3%; Hero MotoCorp, down by 3.15%; and Ashok Leyland, which lost 2.78%

CRISIL data estimates the restrictions have cost commercial vehicle manufacturers Rs 2,500 crore and two-wheeler producers up to Rs 480 crore.

In a rush to ditch obsolete supply, dealers resorted to massive discounting to clear around Rs 20,000 crore of unwanted vehicles in the two days between the announcement and the deadline.

March sales figures for Tata Motors and Mahindra and Mahindra were sluggish, partly on account of these markdowns.

The auto industry may want to plan ahead for the next upgrade of s: the government has signalled its intention to bypass BS-V and convert all vehicles to BS-VI norms by 2020.

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Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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