BS-III exit: Rajiv Bajaj cheers SC verdict, says 'A just cause never fails'

The Supreme Court of India has given a clear message that public health is important, said environmentalist Sunita Narian commenting on the apex court's order banning sale and registration of BS-III vehicles.

However, there is leeway for those who have bought vehicles before March 31 and can register the vehicles by providing the proof of sale.

Speaking to CNBC-TV18, Narian pointed out that companies instead of making BS-IV compliant vehicles continued with BS-III, which causes 80 percent more pollution than BS-IV vehicles.

Standing away from the crowd, Rajiv Bajaj of Bajaj Auto, who was batting for the ban of BS-III vehicles, said that it is the right thing for our children.

Bajaj had earlier talked about the issue of data integrity and that few companies were misleading the SC with a lesser number of inventory. He said that the damage to some of the auto companies could be more than  it was anticipated.

Also, companies like Tata Motors and Mahindra that do not have an overseas market for their vehicles will face a difficult time as selling abroad was the only option for the unsold inventory.

“This is a signal that things are changing,” said Bajaj and Narian concurs with him and added that public health is paramount.

Lashing out at auto companies, Narian said that progressive companies need to break rank and think of the greater good.

“Maruti has no BS-III vehicles but it did not stand differently” and say, “If we can do it so can you.”

Below is the transcript of Rajiv's interview to Sonia Shenoy on CNBC-TV18.

Q: This has come through. The Supreme Court has imposed a complete ban on the sale of BS-III vehicles from April 1. Your initial thoughts?

A: My initial thought is what Gandhiji said, 'A just cause never fails'.

Q: You are one of the few people who are batting on that side. But for the rest of the industry, what do you see as the way forward?

A: I do not know. Frankly, I can say that I never expected this judgement. Perhaps, I heard Vikram Kirloskar saying that it is something completely, it is an awe and shock kind of judgement. I can speak on behalf of Bajaj. Our clear anticipation was that we would be at zero BS-III stock across dealerships across the country by April 1 and as I said to you the other day. It will be so for three-wheelers, it will largely be so for motorcycles.

We have had a little bit of retail resistance on some of our motorcycle brands because of the huge and desperate discounting by the two main competitors and the way we will cope with that and that was our submission also I believe in the Supreme Court that we will divert those vehicles through the export markets. We are a big exporter and we will incur the effort and the cost of bringing them back and moving them overseas. There will be some pain, but I honestly believe that we all breathe the same air and we have done the right thing for our children.

Q: I will come back to this export market in a bit, but I am trying to understand why has this come as a big shock because the message was loud and clear from way back in February, 2016 that companies have to eventually move to BS-IV and companies like you have done that. So, why would this come as a big shock to the industry?

A: I would because as everyone has been saying and if I may say so, even up until this morning, people in media themselves and people who were present in the court yesterday were telling me that all said and done, it is in the larger interest of being pragmatic that there is so much inventory out there and all said and done, the notification does say date of production. So, such and adverse decision, if I may say so, though I am delighted with it personally, was not expected.

I guess, this is a real signal that things are changing and that something really more is expected from the industry and I think – this is just my personal guess – that what the Supreme Court has noted is this that after November, when demonetisation took hold and all of us talked about how demand had softened, you would actually expect to see BS-III production go down not only because April 1 was approaching, but because demonetisation had taken hold.

Instead of going down, people have actually ramped up production of BS-III products. What does this tell you about where the heart lies in this process? And that is what has gone against people. And as I have always been saying, and I do not think anybody has really picked it up, what if going from BS-III to BS-IV had actually resulted in every truck becoming Rs 2 lakh cheaper? Then would people have postponed this? No, they would have done it in double time.

Q: I take your point entirely because if one had tinkered with the BS-IV deadline also, it would have then eventually impacted the prospects also of introducing Euro-VI by 2020. So, that whole timeline that the industry was trying to meet would have gotten tinkered. But coming back to that point about manufacturers now trying to sell their unsold inventory in the export market, don\'t many of these export markets have higher emission norms themselves? So will it actually be easy to do that?

A: Except for Europe and maybe one or two other places, I do not think the norms would be a challenge. The challenge would be the exports themselves because if you look at makers like Tata, Mahindra, Hero, their exports are close to nothing, maybe 2-4 percent of sales. It is only people like TVS and of course, Maruti, Hyundai are big exporters, but they are already BS-IV compliant. So there, no problem. So barring people like TVS and ourselves, everybody else, pardon my saying so, is in a lot of trouble.

Q: For companies who will not be able to sell it or who do not have such a big presence in the export market, what do you think they could do now? Will it be liquidating inventory with very high discounts and will there be a big impact because some analysts have done a back of the envelope calculation saying, even for a company like Hero, that has about 3 lakh units of unsold inventory, it will barely be 20-30 basis points impact on their earnings if they get rid of the inventory with high discounts.

A: Honestly, I do not know because the problem is that no matter how much you discount, unless you give it away free, how many are you going to sell in the last two days? We are already on March 29. So, if I understand the order correctly, from what I am hearing on your channel itself that after April 1, you cannot sell BS-III, you cannot liquidate a million automotive products in the next 2-3 days. So, it does not matter what level of discount you offer.

And as far as the stocks are concerned, let me tell you this, however poor it may sound, do not be surprised if the stocks are actually higher than the numbers that have been given to the Supreme Court. So, the damage that we are looking at may actually be higher than what we think it is.

Q: You want to come in on the fact that all this talk about extra unsold inventory, etc. it does not hold true that Mr Vinod Dasari is talking about?

A: That is okay. I respect his position as Society of Indian Automobile Manufactures (SIAM) President. Maybe I tend to stick out my neck more than I should, but I will stand by what I said. I will point out that even yesterday or day before, in the Supreme Court, there was variants found, at least in the case of one significant maker between the data submitted earlier and day before. But okay, maybe it is a one-off case. I do not think so, but I will leave it at that.

But I completely agree with what Vinod is saying about the body building, etc. That is a peculiar phenomenon, very real phenomenon and I would like to believe that that has been factored into the Court\'s decision. So, somebody who has bought chassis has to build a body on it and get it registered. He is absolutely right.