Automakers fear big losses after NGT curbs diesel car sales
With a sword of confusion hanging over the delivery of already-booked cars and the year-end pressure of clearing stock, automakers fear an immediate loss of ‘hundreds of crores of rupees’ after NGT recommended restrictions for curbing the sale of new diesel vehicles in the national capital.business Updated: Dec 13, 2015 20:47 IST
With a sword of confusion hanging over the delivery of already-booked cars and the year-end pressure of clearing stock, automakers fear an immediate loss of ‘hundreds of crores of rupees’ after NGT’s order curbing the sale of new diesel vehicles in the national capital.
The companies want the government to immediately clarify about registration and delivery of the vehicles for which the customers have already made part or full payments, even as they also stare at huge losses in form of the inventory they had lined up for year-end sales -- typically a period when industry doles out big discounts to clear the inventories.
The auto industry was jolted into this ‘confused’ state after the National Green Tribunal (NGT) on Friday ordered an immediate ban on registration of diesel-run vehicles in Delhi as also on renewal of registration of such vehicles which are more than 10 years old.
According to the industry estimates, the order has led to an immediate impact on ‘thousands’ of diesel vehicles, including high-end cars, that have already been booked by the customers in Delhi by making full or part payments and the process was underway to deliver those vehicles and get them registered.
The exact number of affected vehicles could not be ascertained immediately, while many more ‘thousands’ of diesel vehicles would also have to remain in godowns as the companies would not be able to sell the inventory they had lined up for year-end sales. Industry estimates suggest this would mean possible losses to the tune of hundreds of crores of rupees.
Most automakers effect price hikes in the month of January, due to which many customers tend to buy the vehicles in the year-end period when discounts are also available.
The automakers, however, are hopeful that the government, while implementing the NGT order, will take into consideration the fate of all the vehicles which were already in the showrooms before the ban was ordered on December 11.
“As far as instruction to dealers is concerned, we are confused. We don’t know what we have to do in Delhi,” Mahindra and Mahindra executive director Pawan Goenka said.
When contacted, Maruti Suzuki India chairman RC Bhargava said he would first like to look at the order in detail before commenting anything on the matter.
According to an auto sector analyst, around 1,400-1,500 vehicles are registered daily on an average in Delhi, out of which around 30% are diesel-run.
There are customers who have purchased vehicles, but registrations have not happened yet.
“What will happen to them, I don’t know. Those vehicles which are already in the showrooms in Delhi, what will happen to them, we don’t know either,” Goenka said.
“There are so many questions that arise out of this order, we hope that the Government of India will issue some clarification on how the NGT order will be implemented as it raises many issues in the short term,” he added.
Expressing similar views, Hyundai Motor India senior vice-president (marketing and sales) Rakesh Srivastava said: “The channel partners are faced with a challenge of addressing customer concerns on registration and delivery of vehicles for which payment has already been accepted.”
He further said, “Also, the challenge is on the inventory of diesel vehicles and the cost of it. It would adversely impact their viability as inventory levels are high in anticipation of high year-end sales.”
While it is difficult to ascertain the exact number of vehicles in stock affected by the ban, according to industry players, most of the automobile manufacturers keep inventory of 4-6 weeks at their respective dealerships.
Renault India operations country CEO and MD Sumit Sawhney said, “Customers are confused. At this stage, everything is at a standstill because of this knee jerk and ad-hoc step (of NGT). We are waiting and watching.”