Hard to liquidate BS-IV stock before March 31 deadline, auto dealers fear

With several state governments issuing circulars to end registration process for BS-IV vehicles much before March 31, 2020, and the fear of coronavirus keeping buyers away from showrooms, automobile dealers fear that they would not be able to liquidate the BS-IV inventory before the month-end deadline.

According to automobile dealers' body Federation of Automobile Dealers Associations (FADA), things were under control till February-end and it was only in the first week of March that the dealers started getting circulars from state transport departments with deadlines for getting the BS-IV vehicles registered.

Besides, the banks also came out with notices that they would not finance BS-IV stock after specific dates in March, further impacting the confidence of the dealers. It was followed by the coronavirus outbreak, which has led to steep fall in footfalls in the showrooms.

"So, lot many things have come together and, now, suddenly there is fear among dealers that they won't be able to liquidate the BS-IV stock. At the start of March, we were reasonably confident that the problem of leftover stock would not be much," FADA President Ashish Harsharaj Kale told PTI.

Dealers have started getting circulars from state transport departments with different sets of deadlines to close the registration process for BS-IV models, he added.

The dealer body has approached the state governments and the Ministry of Road Transport and Highways regarding the matter but the confusion has already impacted the confidence of the dealer community, he added.

FADA is also engaging with banks to continue finance for BS-IV units till the March-end, Kale said.

"We have received some support from states like Punjab, West Bengal and Chhattisgarh. They have assured that they will open even on the weekends to clear the registration process," he added.

Elaborating on the BS-IV stock levels, Kale said two-wheeler dealers were the worst impacted with over 20-30 days of the old inventory yet to be liquidated.

"The problem is across the board in the two-wheeler segment. Comparatively, dealers of passenger vehicles and commercial vehicles are in better shape," Kale said.

When asked about the strategy in a worse-case scenario if dealers were unable to liquidate the BS-IV stock before March 31, Kale said, "If the feedback comes across that they are unable to sell their stock then we will have a discussion with the OEMs (original equipment manufactures) that how we can jointly come out of this, otherwise the dealers will face huge losses."

FADA would also seek legal remedy, though the Supreme Court has already ruled out any extension of the last date of BS-IV vehicle registration in the country.

"But, since there are so many new factors which have come in so that call (taking legal recourse) we will take around March 11-12 after consulting our members, but we will have to take action, otherwise dealers will have huge losses," Kale said.

These are the only two options available with FADA right now, he added.

"We will discuss with OEMs how do we do it (sell vehicles)? Should we bring in better schemes or the OEMs take the stock back and liquidate it somewhere else," Kale said.

In the current circumstances, any unsold BS-IV vehicle would end up as scrap after March 31. From April 1, only BS-VI-compliant vehicles will be registered in the country.