In a judgment, the Supreme Court on Wednesday ruled that vehicles not compliant with Bharat Stage IV (BS IV) emission standards cannot be sold in India after 31 March. The ruling has taken the automobile industry by surprise, with analyst estimates that BSIII vehicles in existing inventory may be worth as much as Rs. 15,000 crore. ICRA estimates that the passenger car industry may have about 74,000 such unsold units in the BS-III make, and a total of 820,000 such units across two wheelers, passenger and commercial vehicles. 

Tata Motors said in a statement that the move by the Supreme Court "will have a material impact on the entire automotive industry, OEM’s and dealer network". Typically, the company pointed out, the transition into BS IV would have happened following the stopping of production of vehicles with the previous standard. The pre-empting by the court, Tata Motors said, is a ‘penalty’ to the entire automotive industry, making existing inventory redundant. 

What will firms do with leftover inventory? One possibility is sales at discounted prices to export markets such as Africa. With the shift to BS IV norms already in progress acorss most auto companies, the biggest hit may be in the commercial vehicles segment, where the transition to new emission norms is usually over a more extended time period.