In an interview with CNBC-TV18, Rajiv Bajaj, MD of Bajaj Auto said there is a lack of clarity on the launch of the ULCC project. However, the company is on track for the launch of the RE60 by the end of FY13. He is also confident of a 30% rise in October, November volumes
We are confident that right from R&D to distribution we have the skills and resources necessary to make a success of this four wheeler and that's why we are making a four wheeler
Ending months of uncertainty Japanese auto maker Nissan had announced that it would not continue its partnership with Bajaj Auto for sourcing ultra-low cost cars (ULCC). In an interview with CNBC-TV18, Rajiv Bajaj, MD of Bajaj Auto said there is a lack of clarity on the launch of the ULCC project. However, the company is on track for the launch of the RE60 by the end of FY13. He is also confident of a 30% rise in October, November volumes.
However, September sales are likely to be slightly lower than August, added Bajaj. The company is also eyeing around 70,000 to 80,000 Pulsar sales in the festive season along with 1.5 lakh units Discover sales. Bajaj is also confident of staying within the 20% EBITDA margin zone this fiscal. He further stated that the two-wheeler industry is de-growing at a 10% rate every month.
Here is the edited transcript of the interview on CNBC-TV18
Q: Nissan has called off the ultra-low cost car. Is that now confirmed? You are off that project?
A: I have very little clarity on this and I will tell you why. First of all, I have not heard from either Nissan or Renault. There is no official feedback to us yet. We were promised some feedback after they had seen the vehicle at the auto expo, the RE60 that we showed there. But we haven't heard from them.
Secondly, the lead partner from our point of view on this project has always been Renault. Our first contact was with Renault in Paris, sometime in October 2007 and through all the discussions and the development it is Renault that has been the lead partner.
Nissan has kind of been hanging on the side. I am a little perplexed, because when I read about Nissan's lack of interest, I don't know how to interpret it. Does it mean that Renault is still interested? Does it mean that Renault is also not interested? Or does it mean that they are just both confused, I am confused as well.
Q: So you wouldn't reach out to them?
A: I am waiting to hear from them. It is not that we have not been in touch. We have been in touch from time to time. Every time we have been told that we are still discussing. We need some more time. We will come back to you. I don't mean that in any bad sense.
Quite frankly, the project was reoriented on November 8, 2009 when I met the Renault representative in Delhi and at that time it moved from being an ultra-low cost car which was more of a Nano-like concept than being a four wheeler like and which is what the RE60 is now.
In 2009, it was therefore decided that Bajaj would take the lead to design and develop this vehicle, because Bajaj was best placed according to Renault in terms of frugal engineering to develop such a concept. We have ventured to do that because I have always said that we have a very sharp focus for this project. This four wheeler is the ideal vehicle to upgrade all the people who are today having to use three wheelers, not only in India, but in so many markets across the world.
We export almost two-thirds of all the three-wheelers we make. For our business, it makes a lot of sense as a strategy to defend our leadership, to develop such a four wheeler. Therefore, I have said it more than once that if Renault and/or Nissan were interested in this project, for us it is icing on the cake. But, as far as we are concerned, our cake is intact.
Q: You will launch the RE60 by March or so?
A: Yes, we are scheduled to launch at that time both in terms of product and in terms of the manufacturing facilities. Everything is on schedule and we will go ahead and launch it on schedule. Whether one or the other partner is interested or not or they still take another six months to decide frankly makes no difference to us.
You can well imagine that this being a new product, it is not like we can make 50,000 of it in the first month itself. There is anyway a production ramp-up to take place and I would certainly like to believe that for a long time after production starts, the demand that Bajaj alone will have in its three wheeler markets, not only in India but across the world, will be sufficient to take care of all that. We can produce it in the first few months or possibly even in the first year. So Renault-Nissan can take all the time they want to make up their minds.
Bajaj Auto stock price
On September 23, 2014, Bajaj Auto closed at Rs 2393.35, down Rs 22.65, or 0.94 percent. The 52-week high of the share was Rs 2454.60 and the 52-week low was Rs 1796.00.
The company's trailing 12-month (TTM) EPS was at Rs 112.16 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 21.34. The latest book value of the company is Rs 332.04 per share. At current value, the price-to-book value of the company is 7.21.
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