New Delhi: Two-wheeler manufacturers, in a rush to sell hundreds of thousands of scooters and motorcycles that run on old emission technologies, are offering discounts up to Rs22,000 per vehicle in the two days remaining until a ban kicks in.
On Wednesday, the Supreme Court banned the sale and registration of Bharat Stage-III (BS-III) vehicles from 1 April, putting a question mark on an inventory numbering 670,000 two-wheelers as on 20 March.
To be sure, the aggressive discounting will only have a marginal effect as it is practically impossible to sell and register the entire inventory in the limited time available, dealers said.
India switches to the stricter BS-IV emission norms from 1 April. Automakers were hoping for a relaxation of the norms to let them sell earlier models even after the deadline.
According to previous submissions by the industry, manufacturers and dealers had in their inventory more than 800,000 two-wheelers, commercial vehicles (both small and large), passenger vehicles and three-wheelers compliant with BS-III norms. Of these, two-wheelers are estimated to comprise 80% of the unsold BS-III vehicles.
Market leader Hero MotoCorp Ltd is offering benefits up to Rs12,500, including free insurance and cash discounts, on its range of scooters and motorcycles, as per the advertisements and a circular issued to dealers. While the company will bear the burden of cash discounts, the cost of insurance will be borne by the dealers, as per the circular issued to the dealers on Thursday morning. Mint has a copy of the circular.
“In order to help you in liquidation of BS-III stocks, the following support is being offered by us," it said. This includes a “customer cashback benefit" of Rs5,000 on HF and Splendor+ models, while the other motorcycle and scooter models have flat discounts of Rs7,500 and Rs12,500, respectively. The schemes are valid till 31 March. Hero had an unsold stock of 250,000 units at its dealerships as on 20 March. A company spokesperson did not respond to calls.
Discounts at Honda Motorcycle and Scooter India Ltd (HMSI), the country’s second largest two-wheeler seller, are even steeper. The local arm of the Japanese two-wheeler maker is offering a cash discount of up to Rs22,000 on its BS-III scooters and motorcycles. “Gear up for cashback offer, save up to Rs22,000 with any new Honda BS-III compliant models across India. Visit our nearest dealership before 31 March," read an advertisement on the company’s Facebook page. Yadvinder Singh Guleria, senior vice-president, sales and marketing at HMSI was not available for comment.
Dealers are not enthused and believe the discounts won’t help much. “They (manufacturers) knew well in advance about new emission norms. Why did they produce so much? These discounts are meaningless as it’s practically impossible to register, sell and get the vehicle financed in such a short span of time," said an HMSI dealer on condition of anonymity. He added that the dealers have no choice but to register vehicles in someone else’s name. “That way, we will at least be able to sell them in the secondhand market, later." An official at Bajaj Auto Ltd, who declined to be identified, said the company has less than 10 days’ stock at its dealerships. “Like everyone else, we also have some offers running," he said. As per a circular issued to its dealers, Bajaj is offering a discount of up to Rs12,000 on select models. A TVS spokesperson declined to comment.
Analysts are more positive. “Liquidating stocks quickly will not be much of an issue for a company like Hero," said Nitesh Sharma, analyst at Phillip Capital India Ltd. He expects an impact of 100 basis points on Hero’s fourth quarter earnings on account of discounts. According to him, besides exporting BS-III models, two-wheeler companies also have the option of recalling models and retrofitting them with BS-IV compliant engines.