What's Bajaj Auto's move to overtake Hero Honda?

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What's Bajaj Auto's move to overtake Hero Honda?

Bajaj Auto is fighting tooth & nail to challenge Hero Honda's position in the 100 cc segment. And it is betting on its newest product - a 125 cc motorcycle.

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S Sridhar , CEO of Two-wheeler business, Bajaj Auto says, "We have two significant brands with us, Pulsar and Discover. This is where our EBITDA margins are much better. Everything is over 10%; some of the brands are over 15%. It is only the 100cc where our margins are very limited; some of these things are close to negligible. So, the idea is first to upgrade our own customer into a better bike. In the process they are very excited and the company also gets an EBITDA margin, which is definitely over 10% because we are yet to finalise the pricing. So this is going to be much better. So with that, one thing will become very clear in India. Bajaj will have the most profitable motorcycle portfolio; all our brands will make a lot of money."

 Excerpt from CNBC-TV18's exclusive interview with S. Sridhar:

Q: In terms of profitability, you expect it to be the strongest portfolio in the industry. But if you look at the industry that is witnessing a fall, Bajaj has been hit the most. By when do you expect it to improve and to what extent?

A: First I will put the industry story straight. The industry story I think is almost 10-12% down and that is what we hear everywhere.

I think Bajaj was always leading it; our growth rate was always much better for the last 3-4 years. This year in the last three months, one is seeing Bajaj doing below the industry.

This is because we were the first to sense what is happening in the industry. We started correcting our stock aggressively from the month of April, May and then June. So we dropped stocks to the extent of 55,000 to 60,000 bikes, which we hope that others will also follow. Hopefully, Honda also has done it in the month of July. That is why you will see again that Bajaj's market share is back at 36.2%.

So, sometimes the market share games have an interplay of how manufacturers approach their trade stock. We always believe in having a very lean stock. So, if we sense trouble we are the first to act, so it has happened. But otherwise if you look at the retail level, our market share is always intact. We have been holding something like 33-34%, which continued to be our kind of market share and it should only grow. So, there is no two thinking at all.