Rs 1,000cr diesel cars pile up with Delhi dealers
The National Green Tribunal's ban on fresh diesel car registrations in Delhi till January 6 has locked car and SUV inventory worth Rs 1,000 crore, virtually crippling operations of companies such as Mahindra & Mahindra, Toyota, Tata Motors, Ford, Nissan and luxury makers Mercedes-Benz, BMW and Audi.
There is large-scale confusion at dealerships as harried customers - asked to wait for delivery despite making payments - seek details about delays. Some have chosen to register their vehicles outside Delhi in NCR regions such as Noida and Gurgaon (provided they can manage an address proof), while a section are asking for cancellation of the booking of the diesel variant as they opt for a petrol option.
"The situation is really bad. The NGT order has nearly shut our operations in Delhi, the largest market in the country," a top official with one of the luxury carmakers told TOI on condition of anonymity. "The dealers are confused and are pressurizing us for some kind of support."
Delhi is estimated to contribute nearly 7% to sales of cars and SUVs in the country and is one of the top markets for premium and higher-variant models. Around 36% cars sold in the city have diesel engines while for SUVs and utility vehicles, this figure is as high as 90%.
Mahindra & Mahindra, which gets almost 100% of its sales through diesel variants, faces a major challenge. "We do not know why diesel is made to look like a culprit even though the vehicles are meeting stipulated government norms," Pawan Goenka, director of the country's third-biggest passenger vehicle maker, said. The company's vehicles like Scorpio and SUV500 are sold only with diesel engine options.
"When a product is meeting all the laws of the land, how can there be a ban? There was no consultation with representatives of the auto industry before this kind of a move. We do not know what to do with the cars parked at dealerships and hope there is a clarification on this very soon," Goenka added.
For mainline players such as Maruti Suzuki, Hyundai and Honda, the situation is still not that acute as they get about 30-40% of their sales from diesel variants. However, even their retail partners are worried as the volumes are substantial. Rakesh Srivastava, senior VP (sales & marketing) at Hyundai India, said dealers are facing a challenging time at the moment. "We are awaiting further details on the matter."
Sources said the problem of excess inventory has been compounded as December happens to be a month when the dealer holdings are high. "Apart from the festive months around Diwali, it is December when retail deliveries are very high as there are year-end discounts. Also, customers tend to buy more in December as prices normally go up from the new year," one of the dealers said.
"Dealers are holding inventory of nearly a month in December and we estimate that as many as 10,000-12,000 diesel cars and utility vehicles are stuck due to the NGT ban," an official with a top manufacturer said.
The dealers are also saddled with a "holding cost" for the inventory as they procure most of the cars on a financing basis. "If the cars are not disposed of in time, dealers need to pay a penalty for delays in payment of financing costs."
An official at a Mahindra dealership in Delhi said business has been halted. "Delhi registration has been shut down for us. It is a bad situation," the official said, declining to be named. "Morale is down and we are absolutely unsure about the future if the ban continues."
For luxury makers, the situation is equally bad. "Around 85-90% of models sold by Mercedes, BMW and Audi are diesel variants. Thus, the offtake in Delhi has come to a halt," an official with a dealership said.