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Two-wheeler makers’ huge BS-IV inventory will not go away post lockdown

G Balachandar Chennai | Updated on April 03, 2020 Published on April 03, 2020

The closure of vehicle showrooms took a heavy toll on registrations amid huge discounting by OEMs.   -  REUTERS

The 10-day reprieve offered by the Supreme Court is no match for the pile-up of vehicles that the companies are staring at

Despite the breather given by the Supreme Court, automakers staring at huge BS-IV inventories, particularly the two-wheeler companies, are not too hopeful of liquidating the stock, thanks to the lockdown.

The spread of the virus and the consequent nationwide lockdown resulted in a suspension of retail sales in the second half of March. The closure of vehicle showrooms took a heavy toll on registrations amid huge discounting by OEMs.

The Supreme Court recently ruled that given the special circumstances, automakers could sell up to 10 per cent of their BS-IV inventory for 10 days after the end of the 21-day lockdown. But how much respite the limited sales will offer remains the million-dollar question.

No festival cheer

Even as the industry was transiting to BS-VI, some dealers had built a higher stock of vehicles in anticipation of retails sales from March 25, with an eye on auspicious days such as Ugadi and Gudhi Padwa, in key markets such as Maharashtra and Gujarat. But the lockdown played spoilsport.

Despite heavy discounting, 5 lakh units of unsold BS-IV inventory — particularly two-wheelers — had piled up last month. Hero MotoCorp had the largest BS-IV inventory (about 10 days), followed by Bajaj Auto (6-7 days), Honda Motorcycle & Scooter India (5-6 days) and TVS (4-5 days), according to brokerage firm Prabhudas Lilladher.

Discounts by the top two-wheeler maker Hero MotoCorp were as high as ₹10,000 apiece for scooters and ₹12,000 apiece for motorcycles while those across other OEMs were not more than about ₹6,000 per unit, it said.

Though the Supreme Court has given its approval for the sale of 10 per cent of the BS-IV stock after the lockdown period, companies and dealers are clueless on what will happen to the remaining 90 per cent.

In no hurry to take off

While there is hope the lockdown will be fully lifted this month, dealers fear that retail sales will take longer to take off.

The wholesale numbers, meanwhile, are likely to remain weak for the next two or three months due to the lockdown and short supply of components that could impact the supply chain.

Industry analysts pointed out that the passenger and commercial vehicle sectors are better placed than two-wheelers. PV manufacturers such as Maruti Suzuki managed to clear most of their BS-IV stock with limited discounts.

Shashank Srivastava, Executive Director (Marketing & Sales), Maruti Suzuki India, said the inventory levels with its dealers were under control, as it had planned the transition to BS-VI early.

Medium and heavy commercial vehicles were battling huge inventories a few weeks ago. But they were also able to liquidate their BS-IV stock despite vehicle registration issues due to the pandemic outbreak.

Published on April 03, 2020

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