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No change in strategy, but will be aggressive in 2-wheeler space: Rajiv Bajaj

Some brokerages downgraded Bajaj Auto while others slashed their target prices due to likely margin pressure going forward.

July 24, 2018 / 01:14 PM IST

Bajaj Auto is planning aggressive pricing tactics in the entry segment, the management said at its annual general meeting on July 20.

After this development, brokerages have turned cautious on the two-wheeler space. They feel competition is likely to intensify and could lead to a price war in the mass market 2W space. Some brokerages downgraded Bajaj Auto while others slashed their target prices due to likely margin pressure going forward.

In an interview to CNBC-TV18, Rajiv Bajaj, Managing Director of Bajaj Auto, reiterated that the company will go after the market with whatever it takes in terms of product, price, promotion and people.

 

Bajaj said he is not proud of the fact that the company is losing earnings before interest, tax, depreciation and amortisation (EBITDA) per unit of Rs 2,000. "However, it is more than compensated by higher volumes. Volumes of Pulsar 150cc increased to 50,000 per month from 28,000 earlier after the pricing war."

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He added volumes of Pulsar 150 - The Quint have doubled to 18,000 units in the past two months. "So, the per unit EBITDA loss of Rs 2,000 in Pulsar 150cc is offset by Quint sales."

The company's third initiative - Pulsar 150 Classic, is priced around Rs 68,000 per unit, slightly lower priced than Honda's Unicorn. "EBITDA has been sacrificed a bit, but pricing 5 percent lower does not qualify as a price war. Corporate addition like this is not uncommon in the market," he stated.

Commenting on the company's strategy, Bajaj said it has not changed its strategy for sports, 3-wheeler, exports and spare parts segments in the domestic market. "We are moving aggressively in the commuter space and have unveiled three initiatives since March. Segmental market share has increased 250-300 basis points compared to others."

Bajaj Auto is bagging higher volumes at the lower end through CT100 ES model and at higher end through Pulsar 150cc, he stated. "This pricing has been in place at least for the last 12-24 months. We invested Rs 300 per unit for additional new features. As a result, volume of these models increased from 5,000 per month to 50,000 per month, which proved that people react to style of the model and not the price. We have already increased price of this model by Rs 500 per unit and have enough elbow room to increase price further."
Moneycontrol News
first published: Jul 24, 2018 12:01 pm
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