The impact is comparatively low as many of the companies like Bajaj Auto, Yamaha and Eicher had already upgraded to BS-IV from January 2017, while market leader Hero MotoCorp, and the No 2 Honda and also TVS Motors have upgraded most of their model before the ban set in, says a Crisil report on the impact on the Supreme Court ban.
When the ruling came the two-wheeler industry had an inventory of 6,70,000 units of BS-III models, amounting to Rs 3,800 crore which is half of monthly sales of the industry. But 10-30 per cent discounts and freebies helped the dealers clear most of the stock in the last three days of March.
This will lead to a 150-200 bps erosion in the aggregate fourth-quarter Ebitda margin of listed players (Hero, Bajaj and TVS) in fiscal 2017, with the industry leader Hero taking a higher impact due to its large BS-III inventory.
Impact on Bajaj's profitability will be much lower due to its lower inventory and lower discounts offered considering the export option. Relative to annual revenues, this works out to 50 bps impact in fiscal 2017 Ebidta margins on Bajaj.
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On the positive side the wholesale deliveries for the industry will remain steady unlike the truck and bus makers, which are expected to fall due to the price hike on new models. This is also because the two-wheeler makers did not replenish channel inventory in the last three days of March, except in a few states like Punjab where 30 per cent of the sales were billed to dealers.
"We, however, expect the gradual inventory build-up to be offset by slower retail sales momentum as much of the demand got pre-poned to March," says the report.
Meanwhile the report said carmakers are largely unscathed, while there will be a marginal hit on the three- wheeler makers. For car companies, with the BS-III inventory at just 16,000 units, the impact is marginal. On top of it, given the steep discounts offered in the last three days March, much of this stock is expected to have been cleared.