Increasing lockdowns to contain the fast-spreading Covid-19 pandemic is worsening the prospects of liquidating the unsold stocks of vehicles compliant with Bharat Stage-IV emission norms.
The Federation of Automobile Dealers Associations of India (Fada) had filed an interlocutory application with the Supreme Court last week for relief as the pandemic has financially impacted auto dealers when they were already battling a prolonged liquidity crisis. Hero MotoCorp also filed an interlocutory application with the top court last week. The apex court is likely to hear both the pleas on 27 March.
Dealership channels are grappling with total BS-IV stocks worth ₹6,350 crore. This includes about 700,000 two-wheelers valued at ₹3,850 crore, 15,000 passenger vehicles worth ₹1,050 crore and 12,000 commercial vehicles worth ₹1,440 crore.
The bottomlines of dealers would collapse if there are no takers for the unsold stocks, warned Nikunj Sanghi, director, international affairs at Fada. “While we had warned that the two-wheeler inventory was more than the desired levels at the beginning of March, passenger and commercial vehicle stock was under control. Historically, Maharashtra sees lot of vehicle deliveries on Gudi Padwa and under normal course, we would have managed to liquidate the BS-IV inventory. However, the coronavirus scare has come as a shock and customers are not stepping into showrooms anymore," Ashish Kale, president, Fada, said on 22 March.
As of mid-March, Hero MotoCorp had inventory of more than 400,000 vehicles at its dealers and the company hoped to liquidate this during Gudi Padwa and the Navratri week on heavy discounting schemes, said three people aware of the developments. However, steeply falling footfall at auto showrooms from 15 March, followed by the complete lockdown imposed by the Union and state governments will severely hit retail vehicle sales at least over the coming few weeks. Emails sent to Hero MotoCorp, and others such as Honda Motorcycle & Scooter India Pvt Ltd, Bajaj Auto Ltd, Mahindra & Mahindra Ltd, Skoda Auto India and others remained unanswered.
“With just a few days to go in fiscal 2020, two-wheeler dealers are anxious as they are saddled with huge BS-IV inventory and are offering higher than normal discounts, around twice the festive season discounts, to encourage pre-buying. Interestingly, original equipment manufacturer (OEMs) that transitioned to BS-VI models in the third quarter this fiscal are impacted less by the BS IV inventory pile-up," said Hetal Gandhi and Pushan Sharma of ratings agency Crisil in a note on 23 March.