Bajaj Auto to add 130 new dealers; plans big launch by Apr

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Rajiv Bajaj, MD, Bajaj Auto , in an interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee discussed Bajaj's auto sales numbers after the street expressed its disappointment which saw the stock drop 4%.

Bajaj, however, says despite the motorbike company's plant shutting down for three days, they clocked their best December sales ever. "In terms of domestic motorcycle sales, sales were up 15% and overall motorcycle sales were up 11%," he details.

While he concedes that Hero Honda has eaten up some of their market share, he suggests looking at the trend over the quarters as opposed to just December.
 
He adds that 130 dealers will be operational from April onwards. "Network expansion is critical to further growth," he says.

Below is a verbatim transcript. Also watch the accompanying video for the complete interview.

Q: Any reason why numbers were sluggish for December? It was a bit lower than market expectations?

A: We did shutdown for three days but I would not attribute it to that. From our point of view, we did well in the sense that it was our best December ever. In terms of domestic motorcycle sales, sales were up 15% and overall motorcycle sales were up 11%.

On three-wheelers, although we did pretty well selling 33,000 three-wheelers, we continued to be constrained by capacity. In the sense that there is a significant shift away from our two stroke three-wheelers to the four stroke, of which we make quite a few but not enough, especially for the export market. There was a slight capacity issue in terms of mix, otherwise on the whole, we have done well.

Q: Have you probably slipped a little bit, maybe a few decimal points, on the market share platform to Hero Honda and TVS Motors over the last couple of months?

A: TVS, I would be doubtful, because they have about 7% market share in the motorcycles space. But I would think that we would have conceded in December maybe a whole point or a point and a half to Hero Honda. But again, I would look more at the trend over the quarters and even over the third quarter as opposed to just December.

One has to look at sales not in isolation but also with profitability simultaneously. All of us will declare results this year. We have said that we want to be in more than 20% EBITDA space. That innovatively means sometimes sacrificing some sales at the lower end, to maintain that profitability and we have consciously done that. That is integrated to our strategy.

Secondly, this time, our portfolio in terms of Discover and Pulsar is very robust. We are limited now, not so much by our product portfolio as by our reach. Hero Honda has about 750 dealers across the country today, TVS has about 700 and we are under 500. We finished a process of selecting about 130 dealers in the last quarter which will be operational in April and for us, that network expansion is critical to further growth.

Q: So what kind of clip are you comfortable with on a month-on-month basis? How much do you want to see it recovered to in the next few months?

A: I would expect that it will be business as usual as it was before December, which means we should be back to 200,000 bikes domestically from January with another more than 80,000 in exports. Close to 300,000 is where I would like to see it and back to about 40,000 three-wheelers, because for both motorcycles and three-wheelers, December is a soft month in general.

Q: I believe Yamaha has come out with a new product that is in direct competition with Pulsar; but it is priced almost 15% to 20% cheaper?

A: I think the price says it all.

Q: Are you not worried about the new competitors coming in, including Hero as well?

A: No, we are extremely aware of that. My concern is less with scale and more with excellence. I am very curious to see what Honda does in the market place, how it tries to make space for itself in the motorcycle industry because so far despite having five brands out there for the last six years, they have not made much of an impact but one cannot obviously underestimate them. From what I know of what the others are doing, I am really not too concerned but certainly, we watch Honda very carefully.

Q: Any production issues going into the new calendar at all, which might dent back the pace of volume growth?

A: No, there are no production issues. We have all the capacity in place. We have a big launch coming up in April. We can keep the momentum going while maintaining a 20% EBITDA.