Several other companies are also expected to disclose their write-offs of BS-IV inventory in the coming weeks
Maruti Suzuki, India’s largest carmaker, has absorbed a hit of Rs 125 crore over obsolete parts of Bharat Stage IV (BS-IV) vehicles which is lying with itself and its vendors.
Maruti Suzuki was the first to start the transition to BS-VI from BS-IV, a full year ahead of the deadline of April 1, 2020. The company clarified that it had no stock of unsold BS-IV cars by the end of FY20.
Several other companies are also expected to disclose their write-offs of BS-IV inventory in the coming weeks which would include fully built vehicles. Their woes were compounded when the final 10 days of March were blocked because of the nation-wide lockdown.
Speaking to analysts after the announcement of March quarter results Ajay Seth, Chief Financial Officer - Maruti Suzuki India said, “We have taken a write-off of about Rs 125 crore which is including the vendors and the stock we had inhouse so that’s the obsolescence we had on account of the BSIV stock components we had."
More than 800,000 BS-VI vehicles have been sold by Maruti Suzuki since the time the company sold its first BS-VI vehicle in April 2019. The company leads in competition to Mahindra, Hyundai, Tata Motors and others which were producing BS-IV cars even closer of the deadline of March 31, 2020.
The Supreme Court did allow the sale of 10 percent of the BS-IV inventory after April 1, 2020 following a joint petition from the manufacturers and dealers. This was to be done after lifting of the lockdown. But, the continuous extension of the lockdown period impacted the liquidation process.
BS-VI cars are less polluting but cost more than their predecessor BS-IV while performance and fuel efficiency remain largely the same. BS-VI vehicles preferably run on BS-VI which is now available across India.
Maruti Suzuki had to give up all of its diesel offerings such as the Brezza, S-Cross, Ignis, Swift, Baleno and Dzire before moving everything to just petrol and CNG. Diesel upgradation to BS-VI was proving to be very cost ineffective which was enough to discourage buyers.
While the final week of March saw Maruti Suzuki, along with its peers, shut down the factories in the wake of the lockdown call given by the Centre, the company did see discounts rise during the quarter compared to the same quarter last year.
“We saw discounts per vehicle in Q4 at Rs 19,051 as against Rs 15,124 in Q4 FY19,” added Seth.
The Q4 discounts were however significantly lower than previous quarters when Maruti doled out an average of Rs 33,000 discount on every car sold during the December quarter and about Rs 25,800 during the September quarter. The December quarter discount was also the highest in the company’s 37-year history.
While there will be no cutback in investments for new product development Maruti has made a significant adjustment in capital expenditure. The Delhi-based maker of Ciaz will incur capital expenditure of Rs 2,700 crore, which is the lowest since 2015-16, when it was Rs 2,400 crore. During FY20, Maruti Suzuki had lined up a capex of Rs 4,500 crore but closed the year with a spend of Rs 3,250 crore.
A previous version of the story inadvertently carried an error