Will hike prices by Rs 500-5000; worst over: Bajaj Auto

Rajiv Bajaj, managing director, Bajaj Auto is cheerful after reporting 3 percent increase in September sales in what is known as a difficult quarter.

Speaking to CNBC-TV18, Bajaj says the Q2 is known as the most difficult quarter because it comes in between the marriage season in the first quarter and the festive season in the third quarter. "Hence, one is always happy to see the back of the second quarter," he says.
On the road ahead, Bajaj expects to hold on to the 3.25- 3.5 lakh sales per month for the next three months and adds that the demand issues in its African segment have now been settled.
However, what may not be received very happily by customers is Bajaj’s guidance of an imminent product price hike. The range for the hike is likely to be between Rs 500 and Rs 5000, adds Bajaj. Below is the edited transcript of Bajaj's interview to CNBC-TV18. Q: Do you think the worst is over?
A: I would say yes in the sense that it is well known that the second quarter is the most difficult quarter of every fiscal year. This is because it gets caught between the marriage seasons in the first quarter and the festive in the third quarter and also is overwhelmed by the monsoons, particularly in rural markets. So in that sense, yes one is always happy to see the back of the second quarter. Q: You had mentioned to us earlier that till December perhaps this sector may pull through because of festive season demand, but post that you are expecting the downtrend to resume. In terms of a run rate what do you think you can hold up up until then both in overall sense as well as in the motorcycle segment?
A: About six months back in the domestic market we were selling about 200,000 motorcycles every month which in recent months slipped closer to 160,000-170,000. I am hoping that we can come back into the 200,000 plus zone from December, not so much because the market will necessarily improve, but because of the launch of our new Discover later this month.
As far as export markets are concerned motorcycle sales which had fallen to levels of 90,000-100,000 a month, are now clearly and consistently likely to be over 100,000 a month.
If I am not wrong in September we had motorcycle sales of about 121,000. So, that has come back very strongly and there are lots of reasons why that should continue to sustain. If you put both of them together somewhere between 325,000-350,000 a month is what I think we should be in a position to do. Q: If you put your ear to the ground are you getting a sense at all that this time's festive sales will be better than last year's even by a small margin? We hear so much praise of this big rural boom because of the monsoons.
A: I can actually say that almost everyone seems to say that it will not be as good as last year. So, definitely everybody is very happy to have finished with Q2 and they expect a good jump starting day after or tomorrow with Navratri.
Surprisingly dealers continued to be very positive and they believe that the monsoon has been good, they believe the crop has been good, the prices are good and therefore they believe from January onwards they will see the cumulative effect of all this come through. Q: Can exports really scale up to make up the domestic disadvantage? Things have been going from strength to strength for you.
A: Yes. We have now finally started sales in collaboration with Kawasaki in Indonesia. This is of the high-end Pulsar which has taken off nicely and we will see that jump month-on-month (MoM) and add to our volumes, especially those of the Pulsar.
Very soon we will announce plans to enter other markets in Brazil. So, I think that is going to be one nice momentum and secondly, the good old appetite has come back, settled down after a lots of issues.
It is always uncertain, but let me just give an example. In the month of June, motorcycle sales to Nigeria were hardly 28,000-both our sales as well as retail sales. This has built up nicely over the month and in October, we have poised to export 46,000 motorcycles to Nigeria.
We are seeing this in Kenya, Uganda, Tanzania, in several markets, so the exports will do nicely now in the second half of the year as we had hoped. However, I am also very hopeful that with new Discover, we will do well at home as well. Q: Bajaj Auto was expected to take a price hike. How much could it look like and will you be able to manage in a market like this? Where does your market share stand now? You had lost a bit, last time we spoke with you, has it recovered above 23 percent?
A: The price increase that we will apply in the next few days will range between Rs 500-5,000 depending on the motorcycle or three wheeler in question. This is driven less by forex, because forex has impacted imported suppliers’ components, but more to do with the commodity prices and there has been a lot of cost pressure there. So, at the very least, Rs 500 on some of the lower-end motorcycles building up to as much as Rs 5,000 on three wheelers or on expensive motorcycles as KTM is likely.
As far as market share is concerned, I continue to be of the view that for us it has not gone up or down really at a retail level. If one just looks at our billing market share, in July and August it was closer to 20 percent. I am talking about motorcycles in the domestic market.
If one looks at September, the market share was closer to 24 percent. I think this has more to do with the way each company is billing in anticipation of the festive and not to do with retail sales.
At the retail sale level our market share is between 22-23 percent. I cannot say exactly because I am not privy to the retail numbers of competition, but it is there and it will continue to be there because nothing has changed in the marketplace in terms of new products or price points.