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Oct 01, 2013 01:11 PM IST | Source: CNBC-TV18

Price hike inevitable now; bullish on exports: Bajaj Auto

The fall in sales, however, is not related to the labour strike seen in Bajaj's Chakan plant. "The strike affected us only in June because it happened unexpectedly. Post that, the production has been normal," says Rajiv Bajaj, managing director of Bajaj Auto.

Rajiv Bajaj, managing director of Bajaj Auto expects the August exports positivity to continue in coming days. 

"Exports were overall up about 10 percent to about a 144,000 vehicles, up from 131,000 in August. That gain came primarily from our motorcycles. We exported close to 128,000 motorcycles, about 17 percent higher than August last year which was about 109,000," Bajaj told CNBC-TV18. However, the disappointment in exports came in the three-wheeler segment due to a slowdown seen in Egypt, he explains.

Despite the rupee depreciation and the forex advantage it provides to exporters, Bajaj says the company will not pass on the currency gains to its customers by adjusting prices. 

"In the Asian and the Latin American markets we really compete primarily with Japanese manufacturers and whatever it is they make whether it is out of Japan, Thailand, Brazil or Columbia we were always priced more or less at par. They have not lowered prices and therefore it does not make sense for us to lower prices," highlights Bajaj.

Similar is the case with Bajaj’s market in Africa where the company offers its products at a price premium. "So really at the end of the day the short story is that pricing in a market is determined by competition in that market, not really by foreign exchange at home," he explains.

Another area of disappointment for the auto major was domestic sales. Sales fell 8.46 percent, selling 2,78,583 units in August, 2013 as against 3,04,352 units in the corresponding month last year.

The fall in sales, however, was not because of the labour strike seen in Bajaj's Chakan plant. "The strike affected us only in June because it happened unexpectedly. Post that, the production has been normal," he adds.

Though the company has not hiked any prices in the recent days, a price hike in some brands is inevitable, says Bajaj. This hike, however, may not be across the board, and is likely to be resitricted to some models as some suppliers were reeling under the rupee volatility.  

On the road ahead, Bajaj expects a noteworthy mark-to-market (MTM) loss on account of rupee volatility. He adds that the auto industry, that has seen consecutive months of low sales, will be in good shape if the competition "behaves itself" and doesn't cut prices of products only to get an added advantage over its peers.

Bajaj further adds that dealers are still hopeful and are expecting a surge in sales owing to the upcoming festive season.

"The last two years' monsoons came and went. Dussehra and Diwali approached, but I did not see this underlying current of confidence and a certain positive mindset that they seem to display this year. I do not know whether the majority can be that wrong, but they are very, very hopeful and very bullish of this festive season. Personally very anxious as to what will happen after December, but for now I can say that in September, October, November, the trade will be particularly positive," highlights Bajaj optimistically.

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