Auto companies have a pile of BS-IV cars to sell before March deadline

Mumbai: Dealerships are left with a significant stock of Bharat Stage-IV emission norms compliant vehicles — which cannot be sold or registered in the country from April 1 — despite production cuts by manufacturers as retail sales declined for a second consecutive month in January, reported The Economics Times on Friday.

Registration of vehicles with the regional transport authorities, which is a proxy for retail, fell 7.2 per cent year on year in January. Two-wheelers and commercial vehicles reported the sharpest declines at 8.8 per cent and 6.9 per cent, respectively, while registration of passenger vehicles fell 4.6 per cent YoY last month.

Subsequently, the inventory left with dealers averaged between 25 and 30 days of stock for two-wheelers and commercial vehicles at the end of January, according to data collated by Federation of Automobile Dealers Associations (Fada), a lobby body of vehicle retailers. For passenger vehicles, this was between 15 and 20 days. Majority of this inventory was of BS-IV vehicles, said Ashish Kale, president of Fada.

While the inventory level was lower than in December, it raises concern as any unsold BS-IV vehicles may have to be written off after April 1 when Bharat Stage-VI emission standards take effect.

While dealers were comfortable with the inventory at the start of February, it would be a concern if vehicle makers roll out more BS-IV vehicles, Kale said. "We have requested the manufacturers that any BS-IV vehicles billed further, which are not against specific customer orders, should be on a returnable basis to avoid financial loss to dealers," he told ET.

Kale attributed the decline in sales in January to confusion amongst customers regarding the switchover to BS-VI standards. Many customers were sitting on the fence, he said, weighing their options on whether to buy BS-IV vehicles or to wait for the BS-VI ones.

Buyers looking for diesel-powered vehicles, especially SUVs, were waiting for manufacturers to announce the prices of their BS-VI vehicles before making a decision, Kale said. Many are also delaying their purchase in hopes of steep discounts around Marchend when retailers may be forced to liquidate unsold inventory at a loss, he said.

While passenger and commercial vehicles continued to struggle, three-wheelers and tractors did well in January. Threewheeler registrations grew by 9.2 per cent during the month, while tractor registrations were up by 5.1 per cent. Data on the inventory levels of these segments were not available. Tractor sales were particularly high in January as rains were delayed this year, pushing back the agricultural payments cycle and subsequently the purchase of farm equipment from November-December to January, Kale said.