Hit by SC order, 2-wheeler makers offering heavy discounts

With the Supreme Court having banned the sales of vehicles complying with the earlier Bharat Stage-III (BS-III) emission norms rather than BS-IV from tomorrow, two-wheeler manufacturers are offering heavy discounts to get rid of their inventory.

Saddled with a few hundred thousand BS-III two-wheelers, industry players, including Hero MotoCorp, Honda Motorcycle and Scooter India (HMSI) and Bajaj Auto, are offering discounts of up to Rs22,000 on these models.

The two-wheeler industry had about 670,000 BS-III units as on 20 March. A significant number has remained unsold despite a push from the companies since 21 March, Business Standard reports. Companies will look to export the unsold stocks after today, apart from the discounts.

These discounts will have some impact on the fourth quarter (Q4) profitability of the companies, which will also take a hit during this quarter owing to a decline in volumes after demonetisation.

The steepest discount comes from Japanese auto major HMSI, which also took out advertisements in leading national dailies on discounts, and said on its Facebook page that it was offering a cashback of up to Rs22,000 on any Honda BS-III motorcycles and automatic scooters purchased by today.

Hero MotoCorp, the country's biggest two-wheeler maker, is giving cash discounts of up to Rs12,500 and free insurance on most BS-III motorcycles and scooters. Being the biggest player, its inventory of BS-III two-wheelers is the largest.

These are significant discounts, considering the price of an average two-wheeler is in the range of Rs40,000-50,000.

A company executive said there was an option to upgrade these two-wheelers in order to make them conform to BS-IV emission norms, but that process is elaborate. The manufacturer will have to take back the product from the company's dealers even though billing and payment have been made by the dealer on such products. The next step would be dismantling the two-wheelers and then retrofitting them with a BS-IV engine and other components. ''The process could cost almost Rs15,000 for one two-wheeler. And then it needs to be transported back to the dealer. There would be thin or no margin left to be shared between the manufacturer and the dealer after this process,'' an executive of a two-wheeler maker told BS.

Pune-headquartered Bajaj Auto, which had approached the Supreme Court to stop automobile makers from selling BS-III vehicles after today, is also affected. It is offering discount and free insurance across models. The discount at its entry level motorcycle CT100 is Rs3,000. The Avenger and Pulsar RS200 will come at a discount of Rs7,000 and Rs12,000, respectively. The company, like others, will reimburse the discount to the dealers.

Companies have conveyed to dealers that they will offer support if there are unsold BS-III stocks after today. Bajaj Auto, in a letter to its dealers, said the manner of 'such support would be communicated'.

A TVS Motor dealer said the company was offering a Rs3,000-5,000 discount for all products. TVS said the offer went up to Rs20,150 for select models.

A Yamaha two-wheeler dealer said it was giving a discount of around Rs10,000 for some of its models.

While passing its order, the court had said any BS-III vehicle sold by 31 March would be permitted for registration even in April on giving proof of the purchase date. However, only BS-IV vehicles can be sold from tomorrow.

An Ashok Leyland spokesperson said, ''Our products are in good demand. We will not be offering any price discount. To date, we have sold about 50,000 BS-IV vehicles to customers, who have access to BS-IV fuel.''

John K Paul, president of the Federation of Automobile Dealers Association (FADA), said the stocks with dealers could not be sold even with discounts within the limited period. The dealers may face a challenge if the manufacturers do not take back the stocks after 1 April.

''We will sit with Siam (Society of Indian Automobile Manufacturers) and discuss the issues,'' he said. FADA has around 4,000 members, which own around 11,000 dealer units in the country.

Commercial vehicle makers, which are also hit by Wednesday's order, are silent on discounts. ''The sales and marketing teams are out in the market to close deals. Whatever is the need of the hour will be done,'' said Vinod Agarwwal, managing director and chief executive officer at Volvo Eicher Commercial Vehicles.

A transporter said heavy commercial vehicle majors had been offering discounts in the range of Rs3-4 lakh for the past few weeks and these would continue.

Mahindra & Mahindra (M&M) dealers said it would stay open till 1 am tomorrow, and was witnessing reasonable traction for light commercial vehicles. Discounts in the range of Rs20,000 and above are being worked out. There's no company level discount from M&M. The discounts are varying from market to market.