In what came as a relief for the Indian auto industry, the Supreme Court extended the March 31st deadline for the sale of BS-IV vehicles in India, by ten days post the end of the lockdown period.
Given the special circumstances, where dealerships are facing a tough time clearing their BS-IV stock due to the coronavirus lockdown, the apex court has ruled that only 10%, of unsold BS-IV vehicles, can be sold within 10 days after the lockdown ends. The ruling also stated that no BS-IV vehicle can be sold in Delhi NCR and the vehicles have to be registered within 10 days of sale. The 21-day lockdown period will end on April 14th, which means dealers can sell their BS-IV stock till April 24th, 2020.
The Federation of Automobile Dealers Association (FADA) and the Society of Automobile Manufacturers (SIAM) had moved the top court for extending March 31st deadline for sale of BS-IV vehicles. FADA argued that 15,000 passenger cars, 12,000 commercial vehicles, 700,000 two-wheelers are at stake due to, first the slowdown in the industry and the later the drop in footfall at showrooms due to the coronavirus pandemic.
However, the apex court further addded that there was no point in extending the deadline for sale of BS-IV vehicles and burdening the environment beyond the specified extension. The court said, " Let's learn to sacrifice, do something for country's environment, have sympathy... We understand the psychology of businesses and dealers... You want to take advantage of Corona(virus) for a few days of lockdown in March."
A partner at an advisory firm said, "This move was expected but in reality may not meet the desired objective of clearing the BS-IV inventory because post the lockdown, consumer sentiments will continue to be low, people will observe caution in moving out of their homes and the will be over cautious in spending money particularly on capital assets. This may not result in liquidation of inventory within the next ten days of end of the lockdown. Perhaps, a six-month extension could have helped in these uncertain times."
It has been estimated that the Indian automobile industry is likely to suffer an estimated revenue loss of around Rs. 130-150 billion (US$ 1.7-2.0 billion) due to the coronavirus outbreak. Currently, the two-wheeler industry alone left with BS-IV inventory worth Rs. 46 billion, while dealers we left with an inventory of approximately 835,000 units. Furthermore, with the production being halted, the Society of Indian Automobile Manufacturers (SIAM) has already estimated a minimum loss of Rs. 23 billion each day.
Speaking to a media outlet about the Supreme Court's order on the extension for sale of BS-IV vehicles, Harshil Choksey, managing director, Autobahn Group said, "We are not very happy with the announcement. Ideally, the deadline extension should've been till June 2020, given that the buying sentiment will be low once the lockdown had been lifted. We were looking forward to liquidating stocks at the end of March with Gudi Padwa and the March-end period ideally an auspicious time for the auto industry. However, the lockdown has postponed plans of the same. It will be a burden on the dealers and the banking sector once the lockdown has been lifted to sell the pending 10% of the BS-IV stock within ten days."