Auto dealers fear heavy losses with BS-IV inventory stuck due to Covid-19

Automobile dealers fear of losing thousands of crore as they have not been able to sell a huge chunk of BS-IV stocks due to lockdowns. They said the 10-day relaxation given by the Supreme Court (SC) on March 27 won’t help their situation.

Federation of Automobile Dealers Association (FADA) said that the VahanPortal, used for vehicle registrations, was also is disabled and if it was not opened, dealers would face huge losses as they will not be able to liquidate BS-IV stocks.

The dealers can only sell BS-IV inventory till April 24, under the current situation. The SC had said the relaxation was not for the Delhi-NCR region, making dealers of the area particularly tense.

CARE Ratings has said while the industry players were looking for a three-month extension, till June 30, the 10-day extension won’t help the industry. The buying sentiment, after the lockdown period is lifted, is likely to be low and customers will be cautious in spending, particularly on luxury/big-ticket items. "Even if the pandemic is curtailed, consumer sentiment is expected to be unfavourable and demand is expected to remain muted during H1FY21, led by fluctuating and uncertain economic conditions," said a CARE Ratings report on the impact of Covid-19.

With the spread of the virus and at request of Siam (Society of Indian Automobile Manufacturers) and ACMA (Auto Component Manufacturers Association of India), most of the original equipment manufacturers and auto component players have initiated work from home for its non-manufacturing work staff and have announced temporary shutdowns of manufacturing units. Also, the two main auto clusters in India, Pune and Gurugram-Dharuhera have been completely shut.

FADA said that the industry is sitting on an inventory of 15,000 passenger cars, 12,000 commercial vehicles and 700,000 two-wheelers due to the overall slowdown in the economy followed by the cautious approach of consumers due to the pandemic.

The two-wheeler industry is left with BS-IV inventory worth Rs 4,600 crore, while dealers are left with an approximate inventory of 835,000 units. The Siam has already estimated a minimum loss of around Rs 2,300 crore per day.