We had previously shared that FADA (Federation of Automotive Dealers Associations) has been seeking an opportunity to sell BS4 vehicles post 31 March 2020 (a deadline mandated by concerned authorities about three years ago). While many dealerships were offering substantial discounts to old BS4 stock to clear off their inventory before April 2020, COVID-19 pandemic came as an unexpected crisis.
To reduce its impact, a nation-wide lockdown is currently underway. In other words, no major establishments or business operations (including automotive dealerships) can remain open in India until further notice. This, along with plant shutdowns, has created a lot of confusion among vehicle businesses. While losses are inevitable, FADA had reached out to the Supreme Court to propose a new deadline for updating to BS6 emission norms.
Now, the Supreme Court has allowed a ‘conditional’ extension for selling BS4 vehicles. For what its worth, dealerships are allowed to sell just 10 per cent of their leftover BS4 stock for 10 days post lockdown. Customers who had already bought a BS4 vehicle but could not register it yet can do so after lockdown measures are withdrawn. However, Delhi NCR will not be getting such a provision.
On an average, India’s automotive firms are losing money in a range of one thousand crore rupees per day. Even before lockdown measures were implemented, automotive dealerships had been witnessing a very low number of visitors since a ‘COVID-19 scare’ was already prevalent. Hence, unsold BS4 stock (despite offering attractive discounts) and a nation-wide shutdown in parallel came as a heavy blow. Many dealerships will find it hard to sustain business once matters improve. Dealers had requested the deadline to be extended by 2 months, unconditionally. But with only 10 days extension, and that too with condition, is not really going to help dealers solve their problem/
Meanwhile, government authorities have introduced various relief measures in sectors such as banking, taxation, insurance and general welfare. It is fair to say that India’s automotive industry has not received enough support in this time of despair. In fact, overall unsold BS4 vehicle inventory accounts to more than Rs 6,300 crore.
An initial set of regulations gave three options to dealerships if they have unsold BS4 vehicles post 31 March 2020: (1) sell them as pre-owned vehicles, (2) seek a buyback policy at an OEM level, or (3) send them for scrappage. Out of this, ‘(2)’ could be a viable choice since brands can utilise old vehicles (which are still new on paper) for spares, internal consumption or as development platforms. However, there is no denying that dealerships are heading towards a major struggle in the coming months. Some may even go out of business.