Auto-Industry Suffers The Most Amidst Coronavirus Outbreak And Huge Pile Of BS4 Stock

• Over 7,00,000 unsold BS4 units are left with dealers accruing a loss of about Rs. 6,400 crores
• Supreme Court granted a 10-day extension to sell 10 percent of their older BS4 vehicles from April 15 to April 24
• Hyundai Motor, Nissan, and HondaCars have come up some heavy discounts and offers on their BS4 stock

According to a report by the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle sales dropped to 251,516 units; commercial vehicles fell to 58,670 units, and motorcycles to 816,679 units in February 2020 alone. It worsened when Wuhan, the biggest supplier of key auto components to some of the major companies, became the epicenter of global pandemic COVID-19, and so, its lockdown led to a major loss across all vehicle segments worldwide.

Looking at the market growth, experts fear a production loss of about Rs 50,000 crore to the $120 billion domestic industry. As per the Federation of Automobiles Dealers Association (FADA)’s estimates, over 7,00,000 unsold BS4 units are left with dealers accruing a loss of about Rs. 6,400 crores which had a deadline of 31st March in the normal scenario. But, with the coronavirus scare and 21-day nationwide lockdown, Supreme Court granted a 10-day extension to sell 10 percent of their older BS4 vehicles from April 15 to April 24. 

What still concerns the big industry players is that they are only allowed to clear 10 percent of their leftover inventory, within 10 days of the lockdown lifting on April 14, if only it is not extended further. While the industry expected a three-month extension period to cover up losses, this is was the best FADA could convince the apex court for. 

Given the grim situation, most car makers had already suspended their operations to contain the spread of coronavirus. Maruti, Hero MotoCorp, and Bajaj Auto had shut their plants in Gurgaon and Pune till March 31; Mahindra & Mahindra closed their manufacturing units in Mumbai and Nagpur; and even global auto manufacturers such as Fiat and Mercedes suspended their operations along with Tata Motors, Hyundai and Honda Cars. Not just in India, carmakers had also stopped their operations in Italy, Germany, and the United States. 

Also, the verdict comes right after the lockdown is lifted. If the number of confirmed cases keeps increasing at a current rate, the chances are it could be extended. While the Cabinet Secretary of India confirmed on 30th March for no such plans of extending the lockdown, the chances of people leaving their homes and purchasing new vehicles right after it is lifted are bleak. And in response to that manufacturers and car dealers such as Hyundai Motor, Nissan, and HondaCars have come up with some heavy discounts and offers on their BS4 stock. 

On the other hand, what happens to the remaining 90 percent remains a grieving concern for car dealerships. One of the resorts could be to export the unsold two-wheelers to other countries where the BS4 norms still exist or to downgrade them to BS3 for nations like Nepal, Bangladesh, and Sri Lanka, but it involves huge costs. 

Overall, the verdict might not do any good to the industry or its players since the piled stock is huge and cannot be cleared under any circumstances. It can only be treated as a last resort for car dealerships to cut some of their losses.

Jatin Ahuja

Guest Author The author is Founder and Managing Director of Big Boy Toyz.