SC ruling: Bumpy road ahead for auto sector

A section of the industry would have preferred it to be a April Fools’ Day joke except that the Supreme Court was dead serious.

In a ruling delivered on Wednesday, the apex court made it clear that from April 1 onwards, there would be no registration of Bharat Stage III vehicles. For some two-wheeler and commercial vehicle makers, whose stocks at dealerships exceed eight lakh units, this was the kind of news they were dreading to hear. They perhaps hoped that the Court would take a more lenient view given the potential losses at stake but the latter would have none of it and reiterated that the health of the country’s citizens was far more important.

The next few weeks will see a flurry of activity from manufacturers and dealers in extinguishing these stocks by way of exporting them to BS III-compliant markets and other measures. In the process, production of BS IV vehicles will take a backseat till this exercise is completed. There will also be a feeling of being shortchanged but that is missing the bigger point, which is that legal intervention is a reality that the industry will have to contend with.

To that extent, manufacturers cannot take things for granted any longer and will have to be extra vigilant from now. “This judgment was a slap in the face for those who assumed that nothing would happen,” says an industry veteran. “The auto sector will now need to be on guard and anticipate such incidents going forward.”

After all, it was the apex court, which banned registration of 2000cc plus diesel vehicles in Delhi for a good eight months that came as a huge blow to some manufacturers who were derailed overnight. They had a right to complain but eventually had to grin and bear it till the ban was lifted.

Going forward, more such moves can be anticipated in a country where pollution levels are rising alarmingly with a vociferous green lobby coming down heavily on offenders. In the process, there could also be some arbitrary singling out of vehicles, which only means that manufacturers will need to keep their eyes and ears wider open from now.

This is the same story in other parts of the world too, especially Europe, where the auto industry knows that legislation can play a big role in driving change as in the case of diesel, which is rapidly following out of favour in some cities. The Volkswagen scam of 2015 also ended up being a big shot in the arm for the anti-diesel lobby with the result that more and more players are embracing the idea of electric mobility options for the future.

In the case of India, it has a bigger task ahead in gearing up for the challenge of BS VI norms, which come into effect in April 2020. This is truly going to be a momentous task given that it will involve bypassing BS V and getting ready in barely three years from now. Can industry pull it off successfully especially after all the drama witnessed over the last few weeks on the BS IV transition? There is actually little choice on the matter since the Court is bound to come down heavily on those who are lax.

The truth is that environment is no longer a trifling subject that can be dismissed in living room conversations. It is an issue that is threatening the planet and vehicle manufacturers will just have to be extra proactive and show the way forward be it in Europe, China or India. Sure, the transition to BS VI will involve huge investments and the added risk of losing out customers in a price-sensitive market like India but that cannot be the overriding concern any longer.

Manufacturers will need to plan their production schedules a lot more cautiously and not afford to have an encore of what was seen in the recent BS IV drama. There was really no case to build up huge two-wheeler stocks especially when the country was moving to a cleaner air regime.

There was talk within industry circles that some manufacturers intend to dump BS III bikes at their dealerships, when the right thing to do would be to phase them out gradually. Gunning for volumes and losing the bigger picture on cleaner air has now turned out to be a heavy price to pay for some of them.

There is also no point gloating over their predicament and terming them offenders. On the contrary, the time has come to accept the grim reality that when it comes to issues like the environment, the levels of monitoring the subject have just become more stringent. And going by recent experiences, the Supreme Court is not going to take things lightly.

Yet, there are some disturbing realities to contend with. After Wednesday’s judgment, there were some complaints from automakers about availability of BS IV fuel across the country. Such doubts cannot afford to crop up during the more arduous journey to BS VI. Fuel should be ideally available for testing two years in advance to ensure that it is compatible with the vehicles that will roll out. The industry could be feeling bitter and let down right now but will just have to leave this baggage behind and look forward to the bigger challenge ahead.