Coronavirus: Auto dealers stuck with Rs 6,000 crore inventory; many fear permanent closure
Sumant Banerji March 25, 2020
The second half of March is typically a busy time at any automobile dealership in the country. The end of the fiscal year means targets have to be met. It is also a time when corporate sales are at the highest as companies seek to avail depreciation benefit for vehicles bought for official purposes.
This March was even more crucial. The country embarks onto the BS VI emissions regime leapfrogging from the existing BS IV regulations from April 1, which means dealers need to liquidate their entire BS IV stocks by the midnight of March 31. The outbreak of Coronavirus pandemic has turned it into a nightmare. The 21-day lockdown announced by the government on Tuesday night that would end well past the March 31 deadline, means there are no easy solutions left with the 15,000-odd dealer community either.
Estimates with Federation of Automobile Dealers Association indicate the 26,000 dealerships in the country are left with BS IV stocks worth Rs 6340 crore. Of this, the bulk of around 7 lakh units are two-wheelers worth Rs 3,850 crore. Passenger vehicles account for 15,000 units worth Rs 1,050 crore and another 12,000 units are the typically slow moving trucks and buses that are worth Rs 1,440 crore. As all dealers in the country would remain closed till April 14, this pile up of inventory would be reduced to junk on the morning of April 1.
"It is our worst nightmare come true. I do not wish to be critical of the government as the virus was unforeseen and the lockdown was a necessity but they have to make an exception for us and extend the deadline," says a sales officer who works at a Hero MotoCorp showroom. "The losses either at a dealer or cumulative level will be huge. I am not sure how many will be able to survive this blow. I don't know if I will have a job next month."
FADA has repeatedly reached out to the Supreme Court for a relaxation of the deadline over the last few months and has been thwarted each time. It did so again last week after lockdowns began in a number of states across the country. The crucial hearing is likely to take place on Friday, March 27. It will decide the fate of many dealers across the country.
"It is beyond our control. Inventory levels are high and many dealerships may face closure," said Ashish Harshraj Kale, president, FADA. "Our request is to allow sale and registration of BS IV vehicles till May 31. Production of BS IV vehicles has already stopped so it will not hamper the roll out of new emissions regime in anyway."