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Hero MotoCorp Set to be Most Impacted with Largest Unsold BS-IV Stock

Employees work on an assembly line of Hero Motocorp. (Image: Reuters)

Employees work on an assembly line of Hero Motocorp. (Image: Reuters)

Hero MotoCorp might face the biggest brunt of the impact from the unsold BS-VI compliant stock despite the recent relief by Supreme Court.

In an order dated October 2018, the Supreme Court had said that no vehicle which is BS-IV emission norm compliant, be it passenger or commercial, will be allowed to be sold after March 31, 2020. And from April 1, 2020, only vehicles that are BS-VI emission norm-compliant will be allowed to be sold. During all this while automakers have been working actively towards upgrading their entire lineup to meet the new, stricter emission norm and also, have been planning their inventory in such a way that all BS-IV compliant units get sold out before April 1, 2020. However, there is still an inventory of BS-IV compliant vehicles pending to be sold comprising of about 12,000 commercial vehicles, 15,000 cars and 7 lakh units of unsold two-wheelers. As per the Federation of Automobile Dealers Associations of India (FADA), this inventory is worth Rs 7,500 crore.

So clearly, things did not go as expected and while there are several reasons for it, be it the slowdown in the automotive sales across India or the Coronavirus lockdown, Hero MotoCorp is set to face the biggest impact as per a report by BloombergQuint.

The report also goes on to say, citing an Auto Analyst at JP Morgan, that Hero MotoCorp is followed by Bajaj Auto who will still have a lower risk as it will still be able to export the unsold BS-IV stock. The report, citing JP Morgan, says that out of the Rs 7,500 crore inventory, scooters and motorcycles make up for about Rs 4,000-4,500 crore, Commercial Vehicles are worth Rs 2,500-3000 crore and cars and utility vehicles are of about Rs 800-1000 crore.

Recently, the Supreme Court had allowed the sale of 10 per cent of unsold BS-IV emission-norm compliant inventory for 10 days post lockdown. This comes after Society of Indian Automobile Manufacturers (SIAM) had filed an application in the Supreme Court seeking for an extension to the deadline for selling and registration of BS-IV vehicles which earlier stood till March 31, 2020.

The report adds that according to Goldman Sachs, Hero MotoCorp carries the highest BS-IV inventory of around two weeks and as per JPMorgan, the company could see a one-time hit of around Rs 300 crore on Hero MotoCorp’s earnings in the quarter ending March or April-June.

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