Supreme Court allows sale of 10% of unsold BS IV stocks after lock-down lifts

With the apex court granting a 10-day extension for unsold BS IV stocks, the dealer fraternity and some OEMs get some relief.

By Mayank Dhingra

27 Mar 2020

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Supreme Court allows sale of 10% of unsold BS IV stocks after lock-down lifts

The Federation of Automobile Dealers Associations (FADA) - the unified national body representing 15,000 automotive dealer principals across the country - and vehicle manufacturers today received a reprieve in the form of a clearance from the Supreme Court. It allows them sale of 10% of all unsold BS IV stock/inventory for 10 days from the end of the all-India lockdown (April 14) except in Delhi and NCR.

The apex court which passed an overwriting judgment to its orders of October 24, 2018, against FADA's interlocutory appeal seeking an extension of two months of the deadline, had earlier mandated March 31, 2020 to be the last date for sale and registration of BS IV-compliant vehicles in the country.

Dealer principals, who are members of FADA and operate over 26,000 vehicle showrooms, will now benefit from the revised orders announced today and be able to clear off only 10% of BS IV inventory by midnight of April 24-25, which is ten days after the day when the 21-day coronavirus-induced nationwide lock-down gets lifted, if it is not extended.

Sold vehicles to be registered by April 30
The Supreme Court has also allowed vehicles which were sold before the lock-down but couldn't be registered due to closure of all non-essential services in the country.

As per the apex court's orders, all these vehicles need to be registered by the concerned authorities latest by April 30, with an obligation on FADA to furnish details of their buyers on an affidavit to the court within seven days of the order, through email.

According to FADA's interlocutory appeal, a total of 105,000 two-wheelers, 2,250 passenger cars and 2,000 commercial vehicles were left unregistered before the country went into a total lock-down on the night of March 24.

The appeal also stated that 700,000 two-wheelers, 15,000 passenger vehicles and 12,000 commercial vehicles are still lying unsold with various dealers across the country.

Given the unprecedented nationwide lock-down that took away six working days from March, the apex court has given a 10-day relaxation for the sale of a maximum of 10 percent of all such vehicles after the ongoing lock-down lifts at midnight March 14-15, if it doesn't get extended, with FADA again requiring to submit details of the buyers on an affidavit to the court within seven days of the sale, only after which the registration of the vehicles will be allowed.

The order also states that no such unsold vehicle will be allowed to be sold any further in the Delhi-NCR region and that there shall not be any violation.

In an interview to Autocar Professional on March 24, veteran dealer Nikunj Sanghi and managing director of JS 4Wheel Motors, had flagged his concerns by saying: "There are sufficiently large numbers to create panic and the lockdown is only making it worse. If relief doesn't come, it will be a catastrophe."

There was also a huge concern of the inventory value plummeting to less than 10 percent, which is the vehicle scrap value in most cases.

Now, as the dealer body has received this extension, a collective effort between OEMs and their dealer partners will be required to roll out alluring schemes to attract buyers, given the prevailing situation in the market and economy at large.

The Coronavirus outbreak, apart from bringing a forced stop on all economic activities in the country, has also put a big question mark on the revival of business and normalcy. It might just take the industry more than a while to get consumers walking to the showrooms.

Speaking to Autocar Professional, a senior executive of a passenger vehicle OEM said, “We have to study the court order in greater detail to come to a final conclusion. Prima facie, it reads that 10 percent of the inventory can be sold after the lockdown, however the remaining 90 percent will still be a big burden to the dealers.” It is likely, he adds, that dealers will register 90 percent of their remaining stock in their own name. Today's order will be more beneficial for dealers with smaller inventory levels.