Feb 04, 2013 06:21 PM IST | Source: CNBC-TV18

No concrete signs of sales pick-up yet, says Bajaj Auto MD

Two-wheeler sales remain sluggish and there are no concrete signs of a pick-up yet, Rajiv Bajaj, MD, Bajaj Auto said on Monday.

Moneycontrol Bureau

Two-wheeler sales remain sluggish and there are no concrete signs of a pick-up yet, Rajiv Bajaj, MD, Bajaj Auto said on Monday.

The India's second largest two-wheeler maker reported a 3 percent year-on-year rise in January sales at 3.48 lakh units. Motorcycle sales were up just 2 percent at 3.01 lakh units, while commercial vehicle sales rose 7 percent to 46,263 units. Exports were up 10 percent at 1.28 lakh units. The company said sales were higest ever for Jan.

Bajaj told CNBC-TV18 that there was some festive season spike in sales in Oct-Nov, but since mid Dec, the market has been flat and although there has been some growth over Dec-Jan, there is nothing to celebrate yet.

However, he is confident of the company achieving its target of 4.3 million (43 lakh) unit sales in the current financial year (FY2013).

Bajaj had said last month, that the company would miss its 5 million (50 lakh) sales target for the current fiscal, and would only likely sell around 43 lakh units.

The company is banking on new launches like the Discover 100T it launched recently to drive sales growth and help boost market share, which has flattened out at around 25 percent.   

Bajaj said that around 15,000 Discover 100Ts have so far been sold to distributors and the company is satisfied with the response the bike has got so far.

Bajaj Auto shares were up 1.2 percent at Rs 2,081 on NSE in morning trade.

Below is the edited transcript of Rajiv Bajaj interview to CNBC-TV18

Q: Your monthly numbers look a bit sluggish. Low single digit growth in most categories. Would you say that January has turned sluggish once again after the festive push?

A: I would say that there are probably two factors. One, no doubt the market is flat. Post-festive there is no pick up really, it was just little bit of a spike coming from the festive. Right from the middle of December the markets have been flat. I am personally happy it is not in the negative area, but there is no doubt that there is no significant growth.

So, I think that is one reason. The other reason is simply that sometimes we tend to follow the numbers too closely. If we were to take a step back we would see that December was a little too good. It was also a reflection of the fact that most manufacturers had little elbowroom in December to put some stock into the dealerships.

More specifically in December the billing was more than the secondary retail. In January, we have tempered that a bit. The billing is a little less than what we have retailed. So if we put the two months together we see that there is 5-7 percent growth. However, it is not much to celebrate.

Q: Post your numbers you indicated that the new target for the year could be 4.3 million units. Does that still stand or do you think it might be a bit softer than that?

A: No, I think we are good for that. We have finished the first 10 months with 3.6 million vehicles as opposed to a little more at the same time last year. This was, I think 3.67 million, so almost identical.

Our recent run rate has been about 350,000 units each month of both motorcycles and three wheelers, domestic and exports put together. So, if I were to assume that we remain in that zone for the next two months that would be another 700,000 vehicles in addition to the 3.6 million. That would be exactly 4.3 million.

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Q: Can you give us an update on Discover 100? Do you think that product will be able to win away significant market share over the next few months for you?

A: I am very pleased with the response we have had to that. From a strategic point of view, so far in the last 25 years every time Bajaj put out a 100cc motorcycle and without exception it was at a discount to the market leader Hero. That would typically be a discount of 10-20 percent.

It is for the first time we have actually positioned something above. We think the bike offers a lot and deserves to be priced there. We are at 5 percent to both Hero’s Passion and Honda’s new motorcycle the Yuga. In its first month we had put out 3,000 vehicles. Undoubtedly, these are largely sold to dealerships right now. Except to say that I have a good feedback from the market, I do not have much more in terms of consumer response.

However, these two months will be very important. February will be a month when we will try to push volumes up and we will rollout the communication. That should bring a lot of awareness and competition in tenders into our showrooms. If this product is going to give us incremental market share then the proof of the pudding will happen in March in my view.

To be more specific, we have been typically at a domestic motorcycle level of 200,000 units a month. If the Discover 100T is going to give us the next level, then I would like to believe that at least 10 percent growth from there, 220,000 plus should be where we should be marked. If that happens it augers, it will be very well for us heading into the next year.

Q: Any market share target for this year? The observation seems to be that Bajaj’s market share has more or less flattened out at 25 percent odd level?

A: That is absolutely correct. We have remained at 25 percent. I will hasten to add in terms of domestic market share and 32 percent including exports. This is largely a reflection of the fact that we have been focused on the 125cc. Space above this is only 35 percent of the market in volume terms.

I am very hopeful that with this new Discover 100T which is priced at Rs 50,000, we get a foot in the door for retail growth out of the 100cc segment. That is 65 percent of industry and where we have a poor 20 percent market share.

If that works then based on the platform of the new Discover 100T we have a couple of big launches in the next six months in the 100cc space. It is something that we have been working on for a long time. We had to get the equation right between really offering a lot of differentiation to the consumer at a price he would expect.

However, at the same time protect our bottom-line in 20 percent area. We have cracked that platform. If the Discover 100T is rightly valued, then we will push rapidly towards higher market share in the 100cc space. That I hope in terms will take our weighted market share up closer to 30 percent that we have been eying for a long time.

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