Bajaj Auto warns of further price increase as input costs continue to soar

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Bajaj Auto, one of India’s largest two-wheeler makers, may have to increase prices of its motorcycles if raw material prices continue to head north as they have in the past few weeks.

The Pune-based manufacturer of Pulsar and KTM range of bikes has seen costs rise by 2-4 percent since November led by a jump in the price of raw materials like steel and precious metals. This has forced the company to increase prices of its products in the range of 1-3 percent.

Speaking to Moneycontrol Rakesh Sharma, Executive Director, Bajaj Auto said: “We have taken price increases in November and then in January. This has, however, not fully recovered the cost increase we have suffered. We are very conscious that demand is recovering and we have to balance demand and profitability. We are watching the competition as well."

Bajaj Auto, which announced its December quarter revenue today, clocked an increase of 8 percent in domestic two-wheeler sales to 5.85 lakh; however, sales of commercial vehicles dropped 65 percent to 34,230 units.

“We can expect to see at least for the next three months some headwinds cost increases led by raw material cost increases. We don’t like to digest the cost increases we would like to pass it on. But the only concession we allow ourselves is to calibrate the passing-on of the cost increases particularly because the business environment is a wee bit fragile,” Sharma said.

Tyremaker Ceat raised prices by around 3 percent in December and another 3 percent increase is expected in this quarter. The price was raised across categories, except the two-wheeler segment where the company carries a premium over rival brands. However, Ceat is not ruling out a price increase in two-wheeler tyres as well during the current quarter.

Domestic two-wheeler demand has been positive since the past few months till December. Volumes of the January-March quarter of this year compared with the same quarter of last year will have a low base effect.

Two-wheeler manufacturers had to reduce supplies to their dealers during the fourth quarter of last year as they had to switch to Bharat Stage VI (BS-VI) emission norm from BS-IV from April 1, 2020. The dealers were asked to get rid of BS-IV stock before the BS-VI arrived.

“Demand is now running almost equal to last year. The numbers will look really very good because of the base effect. Companies were running down stock in the Q4 of last year. We are in low single-digit growth in Q4 if we were to look at the Q4s of last few years and discount the Q4 of last year from it," Sharma added.