BS-VI switch: Truck and bus makers stuck with unsold stock of 19,000 vehicles

February 18
14:56 2020

Truck and bus manufacturing companies such as Tata Motors, Ashok Leyland and Mahindra & Mahindra have little under six weeks to get rid of the existing stock of Bharat Stage-IV vehicles even as demand continues to remain poor at the retail end.

An estimated 19,000 trucks having soon-to-be outdated BS-IV engines are lying unsold with the dealerships and with the companies, a top supplier of auto components to these companies said. The collective value of this inventory is estimated to be around Rs 2,700 crore.

Speaking to analysts after announcing the December quarter results Amit Kalyani, deputy managing director, Bharat Forge, said “Because of the BS-IV to BS-VI transition nobody wants to make BS-IV vehicles and get stuck with them. There is an inventory of 18,000-19,000 trucks in the market. So the truck makers have to first liquidate inventory and then sell new BS-VI vehicles.”

CV makers have been trying desperately to push out BS-IV inventory since the past several months to make sure that they are not saddled with any unsold stock on April 1 which is when the industry has to switch to BS-VI. Sales of all BS-IV vehicles have to cease by March 31 as per orders from the Supreme Court.

The companies are hoping to avoid a repeat of the situation of BS-III to BS-IV transition when around 40,000-45,000 BS-III grade trucks and buses remained unsold by the end of March, 2017 before the industry switched to BS-IV norms.

Tata Motors’ CV dispatches to its dealers came down by 24 percent to 2.73 lakh during April-January this year while that of Ashok Leyland was down by 29 percent to 1.03 lakh and Mahindra was down by 11 percent to 1.8 lakh, as per data supplied by the Society of Indian Automobile Manufacturers. The three CV producers control 86 percent of the domestic market.

While Tata Motors, the CV market leader, did not share the exact inventory of BS-IV trucks and buses it is carrying, the company did mention that it is engaging with all stakeholders to clear all such stocks before the deadline.

“Retail has been ahead of wholesale for seven straight months in a row, helping us bring down total system stock by more than 61 percent between June 2019 and January 2020. We are actively engaging with customers, channel partners and financiers to dynamically adjust our plans. Our primary target is to achieve zero BS-IV stock by 31st March 2020, and we are optimistic about clearing this stock before the new BS-VI norms kick in,” a Tata Motors spokesperson said.

Chennai-based Ashok Leyland, the country’s third largest CV maker has a total stock of 6,500 BS-IV vehicles. This is split between 3,100 with dealers and 3,400 with the company.

“Very insignificant inventory because we have really been able to do a wonderful job in breaking down the inventory and releasing cash flows, which is the right thing to do. What we have done was methodically clean up the inventory. And we said it is better to see a little bit of impact on market share than to keep pumping in inventory because come 31st of March, either the dealer or we will be cited with BS IV inventory, which will only result in losses,” said Gopal Mahadevan, Whole-time Director & CFO, Ashok Leyland.

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