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Last Updated : Mar 23, 2020 02:36 PM IST | Source: Moneycontrol.com

Coronavirus pandemic |Why this may be the worst time for India's automobile industry

If not sold before April 1, the stock of BS4 vehicles will become useless.

 
 
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The coronavirus pandemic could not have hit India's auto industry at a worse time.

Why so?

Showrooms across major cities and towns have downed shutters choking sales of Bharat Stage IV (BS4) vehicles, auto factories are under lockdown hampering supplies of BS6 upgrades and market sentiments are at its worst with the stock market going back to the levels of early 2017.

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Certain cars, two-wheelers, trucks and buses which comply with BS4 emission norms are still lying with the dealers. If not sold before April 1 this stock of vehicles will become useless as according to Supreme Court directives only BS6 vehicles can be sold and registered on and after April 1.

Which companies could be impacted?

Hero Motocorp, India’s largest manufacturer of two-wheelers and Tata Motors, the largest truck and bus maker, are among the companies who have stock of BS4 vehicles.

Hero, which sells 4.5-5 lakh motorcycles and scooters every month, has already sought three months to get rid of this inventory in its application to the Supreme Court. The company did not clarify the number of BS4 stocks it has but by the start of February it had more than 6 lakh units, most of which were BS4.

Tata Motors had about 7,500 cars and SUVs and an unspecified number of trucks and buses of the BS4 variety by end of January. Tata Motors did not reply to a questionnaire sent by Moneycontrol seeking details of its precise unsold BS4 inventory across passenger and commercial vehicle categories.

Hero which makes Splendor, Passion and HF Dawn is doling out discounts of nearly Rs 21,000 on the BS4 stocks while carmaker Hyundai is selling Santro, Xcent, old Creta and i20 with discounts of up to Rs 1.15 lakh on the BS4 kind.

However, due to the coronavirus outbreak many auto showrooms have downed shutters till March 31, thus making it impossible to clear the older stock. Moreover, regional transport offices that register vehicles are operating at less than half their capacity.

How has shutdown at production facilities impacted?

While the marketing and sales divisions of companies were working overtime to get rid of the BS4 stock, the production teams were working equally hard to boost the availability of BS6 replacements.

Model-by-model upgradation was done by companies but at a pace that did not allow auto companies to complete the transition in time. The result is that many models, especially those powered by diesel engines, are yet to be launched in the market.

But due to the outbreak, more than two dozen car and two-wheeler makers are forced to close manufacturing operations to break the spread of the virus. Plants in Maharashtra, Haryana and Tamil Nadu will be shut till March 31.

Maruti Suzuki, Hyundai, Tata Motors, Mahindra & Mahindra, Honda, Toyota Kirloskar, Mercedes, Fiat, Force Motors, Volkswagen, Bajaj Auto, Hero Motocorp, Honda Motorcycles and Scooter and Suzuki Motorcycle are the companies that have shut down their factories.

What will all this do to auto sales numbers?

“Coronavirus will have a drastic impact on the stock clearance before the March 31 BS-VI transition deadline. The government has not yet taken a stand on granting any extension which is natural given that it is directed by the Supreme Court. FADA has filed a petition in the apex court where we expect the government to be called upon by the Court to take a stand,” said a note from Dolat Capital.

As per data shared by the Society of Indian Automobile Manufacturers (SIAM) passenger vehicle sales in the domestic sector during April-February declined by 15 percent to 2.63 million units while commercial vehicle segment reported a fall of 22 percent compared to the same period last year.

March will most likely be the worst month of the year in wholesale dispatches and as per companies, there won’t be a recovery in demand until the start of the festive period that kick-starts around September.

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First Published on Mar 23, 2020 02:36 pm
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