It’s time for year-end sales of two-wheelers by leading brands because of the Supreme Court’s Wednesday order, which banned sales of vehicles complying with Bharat Stage-III (BS-III) emission norms from April 1.
Saddled with a few hundred thousand BS-III two-wheelers, industry players, including Hero MotoCorp, Honda Motorcycle and Bajaj Auto, are offering discounts of up to Rs 22,000 on BS-III two-wheelers to clear the inventory.
The two-wheeler industry had about 670,000 BS-III units as on March 20. A significant number has remained unsold despite the push from companies since March 21. Companies will look at options to export the unsold stocks after March 31. These discounts will have some impact on the fourth quarter (Q4) profitability of 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 Honda Motorcycle and Scooter India (HMSI). HMSI, which also took out advertisements in leading national dailies on discounts, said on its Facebook page that it was offering a cashback of up to Rs 22,000 on any Honda BS-III motorcycles and automatic scooters purchased by March 31. The second-biggest player in the domestic two-wheeler market did not respond to queries on discounts.
Hero MotoCorp, the country’s biggest two-wheeler maker, is giving cash discounts of up to Rs 12,500 and free insurance on most BS-III motorcycles and scooters. Being the biggest player, its inventory of BS-III two-wheelers is the largest.
Philip Capital says Hero Motocorp’s dealers suggest that they are nearly stocked out as customers are rushing to capitalise on unprecedented discounts of 10% (for mainly motorcycles), going up to 25% (for scooters). Hero’s margins would take a one-time hit by 175 basis points in Q4 in FY17 or Q1 in FY18 due to dealer support and discounts, adds Philip Capital.
These are significant discounts, considering the price of an average two-wheeler, which is in a range of Rs 40,000-50,000. But what is triggering these discounts?
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 Rs 15,000 for one such 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,” said an executive of a two-wheeler maker.
Pune-headquartered Bajaj Auto, which had approached the Supreme Court to stop automobile makers from selling BS-III vehicles after March 31, is also affected. It is offering discount and free insurance across models. The discount at its entry level motorcycle CT100 is Rs 3,000. The Avenger and Pulsar RS200 will come at a discount of Rs 7,000 and Rs 12,000, respectively. The company, like others, will reimburse the discount that dealers are offering.
Companies have conveyed to dealers that they will offer support if any of the latter is left with unsold BS-III stocks on April 1. Bajaj Auto, in a letter to its dealers, said the manner of ‘such support would be communicated’.
With inputs from Sohini Das in Ahmedabad
With inputs from Sohini Das in Ahmedabad
| Automaker | Discounts on each BS-III two-wheeler till March 31 |
| Hero MotoCorp | Up to Rs 12,500 + free insurance |
| HMSI | Up to Rs 22,000 |
| Bajaj Auto | Up to Rs 12,000 + free insurance |
| TVS Motor | Up to Rs 20,000 |
| HMSI: Honda Motorcycle and Scooter India | |
| Sources: Dealerships, market insiders | |