After SC ban, massive rush for BS-III vehicle models being sold on discount

The Supreme Court recently banned sale and registration of BS-III vehicles after March 31

There has been a sudden rise in buyers at automobile showrooms after the Supreme Court banned the sale of BS-III vehicles from April 1 in an attempt to reduce vehicular emissions. While the automobile industry cried foul on the sudden ban, dealerships have tried to push out the inventory at heavy discounts. Almost all the top OEMs showrooms claimed that most of the stocks have been sold out. However, heavy discounts is expected to impact the two-wheeler companies’ margins during the fourth quarter.

Most of the OEMs have confirmed off the record that BS-III vehicles have been sold out in urban areas and they are now targeting the rural belt. 

A ground check at Honda, TVS and Hero showrooms also showed that demand is huge, while supply is nil.

“There is massive rush at dealerships”, said one of the top OEMs CEO.

One of the managers of the top three OEMs said that the company does not have sufficient stock to meet the demand and have to turn down many requests. Meanwhile, the companies have to deal with mad rush for registration of vehicles.

Philip Capital said Hero Motocorp's dealers suggest that they are nearly stocked out, as customers rushed to capitalise unprecedented discounts of 10% (mainly motorcycles) up to 25% (scooters).

‘Hero margins would take a one time hit by  Rs 175bps in Q4 or Q1FY18 due to dealer support and discounts,’ adds Philip Capital. The numbers for other OEMs are expected to be in the region of 100-175bps, he added.

A day after the Supreme Court’s ruling banning the sale and registration of BS III-compliant vehicles from April 1, companies are giving heavy discounts to clear inventories. Discount level goes as high up to Rs 22,000 based on certain conditions.

Across the country, dealers were holding an inventory of 6.7 lakh two-wheelers manufactured under old emission norms BS-III.

Hero offers up to Rs 12,500 off plus free insurance on Hero BS-III two wheelers. For mass market and premium bikes, it ranges from Rs 5000 to 7500.

Honda Two Wheelers India in its Facebook page said that it is offering a cash-back up to Rs 22,000 on any Honda BS III motorcycles and automatic scooters and the limited period offer is valid only till March 31, 2017. The scheme is subject to the actual availability of the concerned BS-III model at the dealership.

The company's Facebook responses reveal that CB Hornet 160R is sold at a discount up to Rs 18,500.

A TVS Motor dealer said that the company is offering Rs 3,000-5,000 discount for all the products and it goes as high as Rs 20,150 for select models. A Yamaha two wheeler dealer said that it is offering around Rs 10,000 for some of its models.

Dealers assured that the registration would be done on Friday and finance could be arranged soon, so that the deal will be closed on the same day.

Industry sources said that the two-wheeler inventory would be in the range of 6.7 lakh units in BS III stock represent half-a-month of sales, aggregating to about Rs 3,800 crore.

Crisil report said, most of this inventory was BS III compliant as only a few players like Bajaj and Yamaha have upgraded all of their offerings to BS IV from January 2017. Others – Hero Motocorp, TVS Motors and Honda Motorcycles and Scooters – started upgradation in batches until the first half of March. Hence, the BS III inventory level for Hero is quiet high at about 330,000 vehicles compared with 80,000 for Bajaj.

Some of the OEMs have assured its dealers that they would take back the unsold units and few of them will be exported to markets where BS-III is in practice.