Mahindra in dilemma over timing of switchover to BS-VI trucks

With no relaxation in the deadline for switching over to Bharat Stage VI (BS-VI), several auto companies are in a fix over the appropriate date to make the switch at their factories.

The Supreme Court has refused to grant any leeway and asked all automotive companies to exhaust their BS-IV inventory before April 1, 2020.

No company will be allowed to sell BS-IV vehicle after the set deadline. Only BS-VI grade vehicle will be allowed to sell on and after April 1, 2020.

Companies have counter-argued that while production of vehicles is in their hands selling the vehicles depends entirely on the customer.

Pawan Goenka, Managing Director, Mahindra & Mahindra said, “It’s going to be a fairly major challenge because neither we can afford to stop too soon nor can we afford to continue too long because suddenly on a given day the sales of BS-IV vehicles have to be stopped.”

The Society of Indian Automobile Manufacturers (SIAM), the industry’s apex lobby body, had sought relaxation in selling date of BS-IV grade vehicles. The SC, however, refused to relent.

“The industry had requested the honorable (supreme) court that to control the last selling date is very difficult because if you look at the dealerships there are some inventory that are as old as one year. One cannot guarantee that inventory can be cleaned up by a given date - that is simply not possible,” added Goenka.

Rival Tata Motors is also planning to switch to BS-VI in January next year. Car market leader Maruti Suzuki has already announced plans to gradually stop making BS-IV vehicles by end of December this year.

“Closer to the given date we have to assess what is the demand in the last three months (of FY20). My guess is the industry will probably start making BS-VI trucks in January and produce both BS-IV and BS-VI and stop production of BS-IV sometime in February. We cannot afford to overstep the deadline so we would be happy to replete our inventory by March 25-26,” added Goenka.

Unlike the passenger vehicle fleet where a couple of models will be axed the entire commercial vehicle fleet of M&M will move to BS-VI, Goenka said.

Companies are apprehensive of switching to BS-VI too soon because BS-VI grade vehicles would cost significantly higher than BS-IV ones straining retail demand. Estimates suggest there will be an increase of around Rs 4-5 lakh per truck.

If the switch is made too soon by one manufacturer then the consumer will move to the competition that is perhaps still producing the same grade vehicle (same tonnage) at BS-IV prices.