Dec 22, 2006, 01.44 PM | Source: CNBC-TV18

Driving into 2007: Where is the auto sector headed?

Hormazd Sorabjee, Editor of Autocar India gives details on what would be the key launches and products to watch out for from the auto sector in 2007 and who he thinks might actually emerge as the winner.

Hormazd Sorabjee, Editor, Autocar India
The auto play is not just about earnings per share and operating margins. It is also about models, which are successful, and there has been a lot of gyration in the market in 2006, particularly in the two-wheeler space.

Hormazd Sorabjee, Editor of Autocar India gives details on the key launches and products to watch out for from the auto sector in 2007 and who he thinks might actually emerge as the winner.

Excerpts of CNBC-TV18's exclusive interview with Hormazd Sorabjee:

Q: Let us start with the two-wheeler space because you have seen quite a bit of flux this year between rivals Bajaj and Hero Honda . There is an expectation that Hero Honda might come out strong into 2007. What is your expectation? What are the products you expect from the big two and what could they do between themselves in the year?

A: I think it is going to be a two-way fight between Bajaj and Honda, especially Hero Honda. Clearly, what has happened is that Bajaj has narrowed the gap and is all poised to overtake Hero Honda, who is going to respond soon. We can expect a whole new bunch of models to be rolled out from them. Bajaj has been phenomenally fast on the product development front and has been very aggressive.

They have actually been very aggressive with the pricing also. This is one of the reasons why the bottomlines have been hit; wafer-thin margins and the competition are also not giving them much respite. We can expect a slew of models from both and each one is going to try and take the game forward in terms of technology, product and styling. It is going to be a two-way fight in 2007 between these two.

Q: Which categories do you think will these two players train their guns on, because there have been some interesting noises from Bajaj Auto on deserting the 100cc space. Hero Honda says that they will focus more on that space. Where do you see the blockbuster launches coming through from these two players in 2007?

A: What is important is when Bajaj says it is going to desert the 100cc space, that is fine. But I think, in the end, we have got to see what the pricing equation is. If they can price a 150cc bike close to that of a 100cc, that is going to be quite a killer product in terms of value and overall appeal. Bajaj may also like to move up the value chain and go into a slightly more premium segment.

Margins are so thin at the lower-end of the market that clearly to look at better profitability on certain models, they will try and position their bikes more as premium products now. Earlier, Bajaj used to bank on just pricing and used to sell on that basis. But now, they have taken product development to so high a level that I think there is a lot of appeal in their products as well.

Contd on Pg 2...

Bajaj Holdings stock price

On November 24, 2015, Bajaj Holdings & Investment closed at Rs 1680.85, up Rs 3.35, or 0.20 percent. The 52-week high of the share was Rs 1715.00 and the 52-week low was Rs 1242.85.

The company's trailing 12-month (TTM) EPS was at Rs 66.85 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 25.14. The latest book value of the company is Rs 535.78 per share. At current value, the price-to-book value of the company is 3.14.

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