BS-VI era kicks off with Covid-19 overhang

Murali Gopalan Mumbai | Updated on April 01, 2020 Published on April 01, 2020

The industry is entering a crucial phase of transition towards BS-VI norms with new products. DANISH SIDDIQUI

For an industry battered by economic slowdown and a lockdown, the emission norms could not have begun at a worse time

April 1 marks the official beginning of the Bharat Stage-VI emissions era for the auto industry.

Over the last 36 months, companies have worked round the clock to meet this stringent deadline. India was the only country globally which set itself the ambitious task of jumping directly from BS-IV to BS-VI, in barely three years.

The fact that manufacturers managed to pull this off successfully has, unfortunately, been swamped by the lethal Covid-19 pandemic, which has paralysed the world. India imposed a 21-day lockdown last week, which means the cake-cutting ceremony for the BS-VI milestone will just have to wait longer.

Rough road ahead

It is not as if things will improve for the auto industry once the lockdown is lifted. Covid-19 has already caused enormous economic destruction worldwide and India will be no exception to this inevitable reality. Job losses will soar and an already lacklustre economy will find it doubly difficult to begin firing on all cylinders any time soon.

In the midst of all this is the huge pileup of BS-IV stocks, largely in the two-wheeler space, across dealerships. These were to be liquidated by March 31, but footfalls were impacted by Covid-19. The Supreme Court directed that 10 per cent of these stocks be sold within 10 days of the lockout being lifted.

In other words, once things are back on track, beginning April 14, dealers will have time only till April 24 to sell part of their inventories, where the biggest worry is two-wheelers. There are nearly seven lakh BS-IV units lying unsold, of which Hero and Honda take up the lion’s share.

“Capping this at 10 per cent means barely 70,000 units can be sold in 10 days, which throws up a bigger question mark on the balance six lakh-plus two-wheelers,” said an auto industry executive. Ideally, these could have been exported to BS-IV-compliant countries but with Covid-19 scorching the planet, achieving something like this is “virtually next to impossible”.

The other source of anxiety for dealers is the possibility of the lockdown being extended beyond April 14. There is no telling what could happen over the next two weeks — much will depend on the spread of the disease across the country.

Million-dollar question

If the Centre believes that there is good reason to stretch the lockdown to end-April, that pretty much means that the BS-IV clean-up exercise will stay buried. It is a million-dollar question if the Court will agree to extend this further. Going by past experience — on the BS-IV transition of 2017 — this is very unlikely.

Both manufacturers and dealers will be keeping their fingers crossed, hoping this does not happen. In any case, the cap of 10 per cent as directed by the Court is by itself inadequate to liquidate two-wheeler stocks. Even closing this door, in the event of a lockdown extension, will only make things worse.

It is still not clear how the monitoring of this 10 per cent will be carried out since there are a whole lot of channels involved in the selling process. Further, it will also not be the easiest of tasks to get State RTOs to support this drive since they have already set in motion different cut-off dates for BS-IV registration.

From the auto industry’s point of view, all this could not have come at a worse time. The economy was anyway not in good shape and the onslaught of Covid-19 has only added fuel to the fire.

Those automakers which have triumphantly pulled off the BS-VI feat will now be hoping that things get back in some shape beginning 2021. The only consolation perhaps is that Covid-19 has spared nobody — the entire world now lies battered and bruised.

Published on April 01, 2020

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