Bajaj Auto has raised the price of 'Dominar' & 'Pulsar Neon' by 5 percent, MD Rajiv Bajaj said on September 18.
This has come as a big surprise given the slowdown that the automakers are already reeling under. There are talks of a goods and services tax (GST) rate cut, but it's unlikely to be announced in the September 20 meeting.
Rationale behind the move
The company's MD Bajaj shared his rationale behind the price hike in an interview with CNBC-TV18.
"In our portfolio of domestic motorcycles, about half our portfolio in volume terms is this sports segment and about half of it is in the commuter segment. In the sports segment, we have not only been the leader but in the last 15 months, we have extended our leadership, gained a lot of market share. Fundamentally because we have had 8 very effective product introductions, four in the Pulsar brand, one in the Avenger, one in the Dominar and we have two new KTMs out there," he said.
"What has happened is each of these has served to increase our leadership share even further and I think depending on the month we are talking about, our share of this sports segment is now between 35 percent and 40 percent. This has affected all our competitors from Honda Motorcycle and Scooter India (HMSI) and TVS Motor Company to Yamaha and particularly Royal Enfield," Bajaj said.
"So in this segment, across SKUs, our price increase has been only a modest 1 percent. I would have liked to have more with the exception of just two SKUs for good reason, one is the Pulsar 150 Neon which was so far the cheapest Pulsar and the second has been on the Dominar 400 where we had a massive upgrade of the product in both in engine and suspension terms. So we put that cost out there in the market space as well," he added.
"As far as the commuter segment is concerned, where we are a strong number 2, we have not changed any prices but on one SKU of the recently introduced CT 110 which represents only 5 percent by volume of our commuter portfolio. There we are not in a position to dictate pricing power and there we have not been able to increase. So it is quite a non-event. I don’t know why there is so much excitement around this subject," said Bajaj.
On the demand for GST rate cut on automobiles
"Given that retail sales for the industry whether two-wheeler or cars seem to be down year-on-year (YoY) by no more than 5-7 percent barring one-two companies, which have issues of their own, I don’t think this qualifies as a crisis and I don’t see any reason why a government – if I were in their position – would respond with something as drastic as a 5-10 percent goods and services tax (GST) loss for this purpose. I would go further to say that they should clearly signal that this is not on the cards, this is not going to happen. We hear from the channel that some customers are waiting in anticipation that something may happen on September 20th or soon thereafter, I think that is not helping at all," said Bajaj.
Increase in price of the Dominar and the Pulsar Neon
"Both on the Dominar where it is about Rs 10,000 on the base of Rs 1,80,000 and on the Pulsar Neon about Rs 4,000 on an ex-showroom price of Rs 70,000. We are very well placed in those segments and there is very good reason. As the old adage goes, you must have the courage to change what you can, the humility to accept what you cannot and the wisdom to know the difference. I think our price increase has been very wise," he said.
"One percent price increase is really a non-event and if it is 5 percent because there is a new product out there or a new regulatory requirement has driven the adoption of ABS technology in the case of the Pulsar then I think consumers understand that," Bajaj added.
In terms of discounts, Bajaj said, "I expect from Hero a mother of all schemes to start very soon towards the end of this month because unless they liquidate over a million BS-IV vehicles, they are going to have trouble with BS-VI just around the corner. So I think the industry will be shaken up by a huge promotion by the market leader and in anticipation we have to be ready for that."