Unlikely to get extension from apex court, FADA seeks OEM help to contain losses

by Mayank Dhingra 22 Mar 2020

As the entire country moves into a lockdown mode to curtail the spread of the Coronavirus, automobile dealers have moved the apex court of the country to plead for a new deadline to liquidate piled-up BS IV stock, which will not be allowed to be sold or registered as new vehicles from April 1, 2020. And that date is nine days later.

The Federation of Automobile Dealers Association (FADA), the primary automobile dealers’ association in India which represents over 25,000 dealers in India, is once again seeking support of the Supreme Court to see if it can avail of an extension to sell BS IV-compliant vehicles. It may be recollected that on February 14, the Supreme Court of India had refused to give an extension to sales and registration of BS IV vehicles beyond March 31, 2020

In mid-February, FADA had said that current situation at the dealer level was a bit of a challenging task, with two-wheeler and commercial vehicle inventory to be a "case of concern".  In contrast, passenger vehicle inventory was at a comfortable level and for some OEMs and models there seemed to be zero BS IV inventory at the dealer level.

Cut to mid-March and with the government and company directives on plant and city closures due to the onset of coronavirus, automobile dealers across vehicle segments, who were tasked with the liquidation of BS IV inventories, find themselves in a bind. No customer footfalls whatsoever, market sentiment at its lowest and the country's focus, and rightfully so, on keeping the impact of coronavirus to the minimum.

While FADA had approached the Supreme Court last week with its petition, the hearing was deferred on the basis of being non-critical amidst the many dynamic situations unfolding in the country. Now, according to FADA president Ashish Harsharaj Kale, the latest update from the Court hints at a probable hearing on March 27 on the same.

However, “We are trying for an earlier listing of March 24 or 25, but there is also a possibility of the Supreme Court shutting down for some time as has been suggested yesterday by the Supreme Court Bar Association to the Chief Justice of India,” said Kale in a message to FADA members.

Now as it scrambles to find means to liquidate the BS IV stocks at dealers, for which the only solution now is an extension of the deadline, FADA is seeking OEM help to get some assurance and support against the losses to be incurred by its members, which could run into several hundred crores of rupees.

“With this background and the fact that many more cities and towns have gone into lockdown, I have today written to the SIAM president and through him to all our OEMs to give us an assurance of return of unsold BS IV inventory in case we do not get a date extension in the Supreme Court,” Kale mentions in his online message.

In a recent interaction with Autocar Professional, Nikunj Sanghi, director – International Affairs, FADA, had hinted of a bloodbath at some dealers after March 10, on account of the sheer volume of BS IV stock piled up.

Sanghi had told this correspondent, “The market is still very fluid and our immediate focus is to liquidate the BS IV inventory. Especially in the passenger vehicle and commercial vehicle segments, dealers of most manufacturers are confident of clearing the (BS IV) stocks by March 10, but two-wheelers are still reeling under tremendous pain."

"Internally, we are keeping a deadline of March 15 to be on the safe side as there are varying degrees of processes to get a vehicle registered and apparently, the NIC will block registration of BS IV on March 31. So, the permanent registration process will need to be completed much in advance," he had said.

While many OEMs are taking precautionary measures by shutting down plants across cities, the primary focus, as could be seen, is the prevention of the spread of the disease. All financial implications and their solution would now highly depend on stimulus measures taken by the government in the days to come. Watch this space.

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