BS-4 stock to the tune of seven lakh two-wheelers, 12,000 passenger vehicles and 8,000 commercial vehicles remains unsold at dealerships across India amid the coronavirus pandemic that has led to lockdowns and closure of non-essential businesses. There's just a week to go for the BS-4 stock liquidation deadline.
The deadline for sale and registration of BS-IV-compliant vehicles is April 1, 2020, barely a week away.
This has led the Federation of Automobile Dealers’ Associations (FADA), which represents over 26,000 dealerships, to file a petition with the Supreme Court, seeking an extension in the deadline till May end.
“There is no way that we will be able to liquidate the stock (before the deadline),” Ashish Kale, FADA President, told BusinessLine.
Beleaguered by the double whammy of the coronavirus-induced lockdowns and dampened customer sentiments, no purchases are being made and this situation will only get worse as the measures to curb the spread of the virus are only going to be intensified, he pointed out.
Auto industry crippled as Covid-19 terrorises the worldIndia has added problems on its plate, such as unsold BS-IV stocks
“This is an extraordinary situation and there is very little a dealer can do. This is something that is not in our hands,” he added.
He said that as of now, March 27 has been listed as the probable date for the Supreme Court’s hearing of FADA’s petition. FADA has requested an earlier hearing.
“In case we are not heard by the Supreme Court, we will engage with the OEMs and see how the stock can be returned to them. We will have to do that — there are many dealers who will not be able to bear this loss,” said Kale.
It’s rush hour for BS-IV vehicle registration: Transport offices see over 100% spurt in registrations per day
“Customers are cautious, they are more worried about their homes and their families being safe. In such a time, nobody goes in for high value purchase, even if they want to. They just postpone it. That is what has started happening and now, the shutdowns (of non-essential businesses in many States) have been added, too,” explained Kale.
He said even customers who have made bookings are not concluding their purchases.
Even before strict social distancing and lockdown measures were enforced, walk-ins to dealerships had started dwindling owing to fears over the coronavirus pandemic, he said. This is one of the reasons why the two-wheeler inventory in particular is high as around 70 per cent of sales in the category happens through showroom walk-ins, Kale pointed out.
The country’s largest two-wheeler maker Hero MotoCorp had also appealed to the Supreme Court to extend the deadline set for sale and registration of BS-IV vehicles due to the impact of the Coronavirus outbreak on retail sales.
Inventory of BS-IV vehicles a worry as people expect huge discounts: FADARegistration of two- and three-wheelers grew in February
“The company has filed an interlocutory application today before the Hon’ble Supreme Court of India seeking relaxation of the deadline set for sale or registration of BS-IV vehicles i.e. 31.03.2020,” it had said in a statement on March 19. “In view of the completely unforeseen developments that have arisen out of the prevailing force majeure situation on account of Covid-19, we have prayed for an extension of time for a period of three months, as this has hampered all aspects of our industry. The Ministry of Finance has also declared that the Covid-19 should be considered as a case of natural calamity and force majeure be invoked.”
Pre-buying in the last quarter was expected to help liquidate the remaining BS-4 inventory, but the rapid rise in Covid-19 cases in India over the past few days has dealt a death blow to retail sentiment, affirmed credit rating agency CRISIL in a report on March 23.
With just a few days remaining to liquidate the BS-4 stock, 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, it noted. PV dealers are not offering discounts, though their CV counterparts – especially those dealing in light commercial vehicles – are expected to offer high discounts to liquidate the remaining BS-IV vehicles, it added.
The coronavirus impact is severe in Maharashtra, Karnataka, Odisha and Kerala, which have seen a 40-50 per cent drop in footfalls, enquiries and deliveries, CRISIL found. Its impact is moderate in Gujarat, West Bengal, NCR and Punjab, while it is nominal in Rajasthan, Chhattisgarh and Bihar, said CRISIL.