COVID-19 Lockdown: Maruti Writes off Rs 125 Crore Worth of Inventory

• Published On: 21 May 2020
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Maruti Suzuki writes off Rs 125 crore worth of unsold BS-IV models.

India moved from the BS4 era to a more stringent BS6 vehicular pollution norms from the 1st April 2020. BS6 cars are less polluting than the outgoing BS4 models but their performance and fuel efficiency remain almost the same. BS6 vehicles are coming with a price hike compared to the BS4 models. The automobile manufacturers were offering discounts on the BS4 models to clear the space for the upcoming BS6 compliant vehicles. Coronavirus Pandemic swept through India forcing the Indian authorities to announce a nationwide lockdown. With the lockdown in effect from 24th March 2020, Indian automobile manufacturers had to close down production and temporarily suspend dealerships. This affected the sale and purchase of BS4 vehicles leading to the companies moving the Supreme Court of India for relief. 

The Supreme Court of India gave an extension of 10 days post the lockdown period for selling off unsold BS4 vehicles. There was a condition that only 10 per cent of their total BS4 stock can be sold despite requests by the stakeholders.

Maruti Suzuki also suffered and has announced that it has written over Rs 125 crores worth of BS4 vehicles in the Indian market. Quoted in the various media outlets, Chief Financial Officer - Maruti Suzuki India said, “We have taken a write-off of about Rs 125 crore which is including the vendors and the stock we had inhouse so that’s the obsolescence we had on account of the BSIV stock components we had."  

The total amount of Rs 125 crore takes into account the BS4 vehicles lying at the dealerships and the production facility. Maruti Suzuki authorized dealerships were given the chance to either register the vehicles themselves and sell it as used vehicles or send the vehicles for scrappage. Dealerships could either agree for a buyback agreement with OEM’s. 

Maruti Suzuki was the first automotive company in the Indian market to adopt the tougher BS6 Emission Norms and discontinued their diesel variants. The company is currently selling 

only the BS6 petrol models with no information on diesel variants whether or not they will be introduced in the near future. Recently it introduced an in-house built BS6 compliant 1.5-litre petrol engine. Most of Maruti Suzuki BS6 models like Ertiga, S-Cross, Ciaz and even Vitara Brezza are powered by the same 1.5-litre petrol powertrain. The four wheeler manufacturer has sold over 8,00,000 BS6 vehicles since the company introduced its first BS6 vehicle back in April 2019.  

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