India’s largest two-wheeler maker Hero MotoCorp invoked force majeure to suspend full payments to vendors, due to the lack of visibility of receivables, with sales having come to a standstill because of the Covid-19 lockdown.
Hero MotoCorp told them that BS-4 and BS-6 vehicles remained unsold at dealerships, which will remain shut at least until mid-April, when the three-week lockdown is scheduled to end.
The decision follows the Supreme Court refusing to grant an extension of the March 31 deadline by which sales of BS-4 vehicles have to stop, despite the lockdown. It, however, allowed 10% of remaining BS-4 stock to be sold in 10 days after the lockdown gets over, except in Delhi-NCR, in its ruling on Friday.
Hero is understood to have the largest share of the total stock of 700,000 unsold BS-4 scooters and motorcycles in the country.
However, the Delhi headquartered company, despite the challenging circumstances, is prioritising payments process to make full and on-time payments to large number of MSMEs and small vendors.
The company told vendors that bill discounting facilities have been withdrawn effective immediately. It will release payments to micro, small and medium enterprises (MSMEs) and suppliers it owes up to Rs 2.5 crore as of March 23 — they will be paid in full as per standard payment terms.
Hero MotoCorp said it made payments up to March 22 as per the regular cycle but will not be able to maintain its track record of timely payments.
It is also reviewing our ability to pay on a daily basis and may amend the payment favorably for the supply chain partners in future.
On Saturday, the company had told dealers it will take back all unsold BS-4 stocks in NCR and will extend some financial support to dealers in other parts of India.
Indian automobile companies have to move to the more stringent BS-6 emission standard on April 1.
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