Maruti Suzuki writes off Rs 125 crore on obsolete BS-IV cars

AAJ KI DELHI/ INDIAN NEWS ONLINE:

Maruti Suzuki, India’s largest carmaker, has absorbed a hit of Rs 125 crore over unsold stock of Bharat Stage IV (BS-IV) vehicles which have now become obsolete.

A top executive of the Delhi-based automaker stated that the write-off is the result of the inventory lying with the company and its dealers. Maruti Suzuki was the first to start the transition to BS-VI from BS-IV, a full year ahead of the deadline of April 1, 2020. However, by the end of 2019-20, the company was left with some unsold stock. 

Several other companies are also expected to disclose their write-offs of BS-IV inventory in the coming weeks. Their woes were compounded when the final 10 days of March were blocked because of the nation-wide lockdown.

Speaking to analysts after the announcement of March quarter results Ajay Seth, Chief Financial Officer - Maruti Suzuki India said, “We have taken a BS-4 discontinuation cost which is a write off of Rs 125 crore. This includes the stock of the vendor and the in-house stock that we had.”

More than 800,000 units of BS-VI kind have been sold by Maruti Suzuki since the time the company sold its first BS-VI vehicle in April 2019. However, there were still some unsold stock of BS-IV vehicles before the market was shut for them.

The Supreme Court did allow the sale of 10 percent of the BS-IV inventory after April 1, 2020 following a joint petition from the manufacturers and dealers. This was to be done after lifting of the lockdown. But, the continuous extension of the lockdown period impacted the liquidation process.

BS-VI cars are less polluting but cost more than their predecessor BS-IV while performance and fuel efficiency remain largely the same. BS-VI vehicles preferably run on BS-VI which is now available across India.

Maruti Suzuki had to give up all of its diesel offerings such as the Brezza, S-Cross, Ignis, Swift, Baleno and Dzire before moving everything to just petrol and CNG. Diesel upgradation to BS-VI was proving to be very cost ineffective which was enough to discourage buyers.

While the final week of March saw Maruti Suzuki, along with its peers, shut down the factories in the wake of the lockdown call given by the Centre, the company did see discounts rise during the quarter compared to the same quarter last year.

“We saw discounts per vehicle in Q4 at Rs 19,051 as against Rs 15,124 in Q4 FY19,” added Seth.

The Q4 discounts were however significantly lower than previous quarters when Maruti doled out an average of Rs 33,000 discount on every car sold during the December quarter and about Rs 25,800 during the September quarter. The December quarter discount was also the highest in the company’s 37-year history.