With unprecedented Coronavirus crisis hitting the auto sector hard, it is becoming difficult for manufacturers to maintain business and liquidity as sales are now at a complete standstill. Hero MotoCorp, India's biggest two-wheeler company, has invoked Force Majeure and has decided to suspend payments to its vendors/suppliers amidst the Coronavirus lockdown as the company does not see any receivables coming in, a report in ET Auto said. The company has over 1 lakh units of BS4 two-wheelers lying at its dealerships across India and all dealerships will be under lockdown till April 14, 2020. Also, it is unclear whether Force Majeure will be applicable after the lockdown is lifted.
"In this situation, we are left with no other option but to invoke force majeure and regret to inform that HMCL will not be in a position to meet all its obligations," the company said in a letter to its suppliers, as viewed by ET Auto. Although, the company did say that it is trying its best to make full and timely payments to MSMEs and other small vendors. The company will release payments of up to ₹ 2.5 crore till March 23, 2020. Hero has also stopped bill discounting facilities for its vendors for now.
"Our other vendors are also receiving payments, albeit in a phased manner on account of the current situation. In fact, we have paid all our contractual workers well in advance for the full month, as they have been the ones impacted most adversely," the company added.
Royal Enfield has invoked Force Majeure and has said that it will suspend payments to a few of its vendors. With its regular business operations disrupted, Royal Enfield decided to prioritise the salary of its employees and the temporary and permanent workforce along with their health and safety. There is no clarity on whether the Force Majeure clause will extend beyond the lockdown.
Source: ET AUTO