Dec 02, 2016 11:38 AM IST | Source: CNBC-TV18

Tough to guide on sales volumes; market share intact: Bajaj Auto

It is tough to ascertain when sales will pick up as the demonetisation pain could continue for few more months says S Ravikumar, President - Business Development at Bajaj Auto.

It is tough to ascertain when sales will pick up as the demonetisation pain could continue for a few more months, says S Ravikumar, President - Business Development at Bajaj Auto.

The company Friday reported 13 percent year-on-year drop in November sales at 2.7 lakh units. Domestic sales dipped 10 percent YoY to 1.5 lakh units with motorcycles sales down 12 percent at 2.37 lakh units.

Exports also slipped 16 percent YoY to 1.15 lakh units.

However, Ravikumar is quick to note the company has managed to keep its market share intact and new product launches are going on as planned.

Bajaj has launched newer variants of Pulsar and its much-awaited 400cc bike Dominar will be launched on December 15.

Below is the transcript of S Ravikumar’s interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Sonia: Things have not panned out well for the entire sector, the two-wheeler sector because of the demonetisation impact. But how long do you see this last and do you think December could also be another weak month?

A: Honestly, when something as fundamental as this effect, it is a huge macro factor. Money is cutting across everything that we do. So that, when the impact is there, it will be a complete misadventure to dive and everybody says that no country has done this in such a large scale and this is the first time. So, maybe we are setting a precedence for anything like this to happen in the future. So, in this situation, we certainly do not want to venture out. It certainly looks like it is not going to be over this month. It is going to pan out a few more months, that is for sure. But beyond that, it will be not right for us to even venture guidance or topics like that.

Latha: But what is your sense? If the withdrawals limits are removed, from then it will ease?

A: It is a huge stock of money which has been pulled out of the system and it has got to portray it. We are not talking about a single pocket. It is a huge country and more than that, the sentiment also should – in the middle class level, we are now saying okay, if this is what I have to live with, I will live with this. Ordinarily otherwise where I would have spent money, I would simply postpone. So, how it will pan out in agricultural sector, it is not know. And as for this, we are really played by the ear. So, it is very difficult for anybody to even make a guess. And how soon it will be happen, again nobody is able to put a finger on it. And I love the way Mr Sinha in a press interaction summed it up, we are good at ‘jugaad’ and the government in certain sense, to some extent deploying jugaad as its strategy, so what are we to do.

Anuj: We were talking to Eric Voss two weeks back and he said it was 25-30 percent for one week. That was the worst impact. Do you think the number would be contained at that at least?

A: It is certainly going on at that type of a level and we are finding that it is across country and rural it is certainly more affected. In these circumstances, for example, what all we can do as companies like Bajaj Finance is trying to make certain procedures which can ease repayments coming in, etc. but beyond that it is a huge turbulence. So, we have to play it by the ear. But that said, I should tell you that our market shares are impacted. We cannot talk about volumes. Market shares are impacted and more importantly, the product action is just going ahead as planned. We have huge launches coming up. The Pulsar MY17 has already gone into the market, that has been very well received. Now V12 has startup production has already happened and that is gearing up. The Dominar 400, but we are going to have the launch of that in Delhi on December 15. There again, production has already started with the factories. So on the back of all this strong product action, while we are not able to talk about the volume guidance, we hope by March this 23 percent plus type of a market share is what we are certainly looking at. And even in the troubled times, our market shares have been held intact in the month of November. And Platinas are doing well.

Latha: How much of your two-wheelers are bought in cash? I assume they will anyway be bought only on cheque. So therefore, should not the pain end earlier?

A: That is not entirely true. In fact, in the entire agricultural sector, even in two-wheelers are bought in cash. People come with on trading community concept a good amount of cash and they buy. And when people want to trade-in, the amount of money that they get by selling the old vehicle is typically coming in cash. And the down payment to the financing happens in cash in most places. It will not be as bad as some other sectors but still there is a huge amount of cash component.

Sonia: Any thoughts on whether exports are seeing recovery or not? So far, between April and November, exports have fallen 22 percent for the company. Any recovery in sight?

A: I should tell you here again. I have been always telling you that when fundamental macro factors are affecting the economies then it is really hard to make any guidance. We have to live month on month, week to week, that is the story. And that said, I can tell you only two, one good example and one where it has been favourable and one more example which stands out in the month of November which is not so good. Coming to the not so good factor for example, Sri Lanka, just out of the blue made huge duty change. And it was just about 15-18 percent has been the increase at the retail price level for two-wheeler and about 10-12 percent for three-wheeler. So when these types of things just come out of the blue, we have to really play it. That has been the negative side.

And for example, in Nigeria, where we have been doing something like 14,000-15,000 units a month, we have been pleasantly surprised by the November retail numbers. You have done a total of 25,000 units 23,000 two-wheelers and 3,000 three-wheelers, that has been very good. And there is a feeling that because of OPEC and that etc. oil prices may firm up a good bit and north ways a bit. And maybe that sentiment will settle around there. So we have really played by the ear and it is very in essence, because we are very close to the Indian economy when something fundamental hits us then we are able to understand the implications. Similar things have been happening also in export markets. That is why guidance is absolutely very difficult.

Sonia: You spoke about the new 400 cc bike Dominar that will be launched on December 15. Initially in the first couple of months, what kind of production and sales targets do you guys have?

A: We are red for making a production of about 10,000 units a month and it should be reaching that level between domestic and exports and we will see how it moves from there. But 10,000 type of a number is what initially we are setting.

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