One can see that the Coronavirus Pandemic has thrown the Indian economy into disarray. Almost all vehicle manufacturers have shut down their operations and dealerships have shuttered amidst the Coronavirus lockdown. With all businesses coming to a grinding halt, auto manufacturers are invoking the 'Force Majeure' clause. One of the companies doing so is Royal Enfield, belonging to Eicher Motors. Royal Enfield has invoked Force Majeure but on a case to case basis, according to a report in Economic Times. The company has not stopped payments entirely but is progressing forward one case at a time and that too for forward looking contractual obligations.
"While we are all together in this, we have no choice but to declare this as 'Force Majeure' and suspend any/all our contractual obligations," Royal Enfield said in a circular that was sent to a few of its suppliers last week. The company clarified that it has not postponed or suspended any payment for materials and goods which have already been supplied. Same goes for services rendered.
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, which ends on April 14, 2020.
Few industry experts say that Royal Enfield's Force Majeure comes as a surprise as the company already cleared its BS4 stock and according to them the due amount to its vendors was not an exceedingly large amount. But these times are unprecedented. No company was prepared for this.
Hero MotoCorp, the biggest two-wheeler company in India and the world, has also invoked 'Force Majeure' and will suspend payment to its vendors/suppliers as the sales of the company have come to a grinding halt and it doesn't see any receivables in the near future. Although, the company did say that it is trying its best to make full and timely payments to MSMEs and other small vendors.
Source: ET AUTO