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A week before BS-IV deadline, lockdown jeopardises Rs 6,400 crore worth of vehicle stock

The lockdown across the country to combat the Covid-19 pandemic has jeopardised Rs 6,400 crore worth of unsold BS-IV vehicle stock with dealers as it cannot be sold after 31 March when BS-VI norms become effective.

Last Updated: Mar 24, 2020, 09.46 PM IST
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MUMBAI/NEW DELHI: The lockdown across the country to combat the Covid-19 pandemic has jeopardised Rs 6,400 crore worth of unsold BS-IV vehicle stock with dealers as it cannot be sold after 31 March when BS-VI norms become effective.

Not just BS-IV vehicles, but it also hampered sales of BS-VI vehicles, which many manufacturers had started producing. In all, it will amount to a lost business opportunity worth Rs 12,000 crore.

Worst hit are two-wheeler dealers with about 700,000 units of vehicles compliant with the outgoing norms, according to data from the Federation of Automobile Dealers’ Associations (FADA). BS-IV passenger and commercial vehicles inventory stood at about 12,000 and 7,000 units, respectively.

Adding to the misery of dealers, the Supreme Court will be hearing matters of only “extreme urgency” in light of the coronavirus pandemic. A petition by FADA to the apex court to relax the 31-March deadline was scheduled for hearing on 27 March. The dealers’ body was consulting with its lawyers on further options, a dealer told ET.

FADA president Ashish Kale in an address to members said the association has taken up the issue with Society of Indian Automotive Manufacturer's Association president seeking an assurance of taking back of unsold BS IV stock, in case if there is no extension from the Supreme Court.

About Rs 35,000-40,000 crore worth of vehicles were expected to be sold during the month of March, according to a calculation by ET.

Retailers see ghost registration as their last hope. Ghost registration is a practice wherein vehicles are registered by dealerships before they go obsolete and then resold afterwards.

Being the fiscal year-end, sales had started picking up as usual till the fear of virus spread pulled shutters down across the country.

"Retail sales have been stable in the first half of the month. But now wherever there has been a lockdown, there are no footfalls. As more and more cities shut down, the number (of closed dealerships) will rise. We will see the actual impact next week onwards," Shashank Srivastava, executive director (marketing & sales), Maruti Suzuki told ET on Sunday.

While no one could have predicted the outbreak of the novel coronavirus, there was resentment in some quarters towards vehicle manufacturers for building too many vehicles compliant with the outgoing emission norms. Dealers cited examples of Royal Enfield and Maruti Suzuki for inventory management. Royal Enfield has cleared BS-IV inventory while Maruti Suzuki has less than 200 units left.

“I see absolutely no grounds for seeking an extension because we’ve had a three-year notice,” Bajaj Auto managing director Rajiv Bajaj told ET earlier in an email interview. “Companies struggling are those that left it too late by continuing to produce BS-IV vehicles well into February.”

Interestingly, even Bajaj dealers have considerable unsold inventory ET has learnt.

(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)
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