Bajaj Auto Dec sales flat YoY at 2.89L; exports under pressure

Moneycontrol Bureau

Bajaj Auto said it had clocked 2.89 lakh unit sales in December 2015, flat compared to a similar figure in December 2014. The company's two-wheeler sales rose 1 percent to 2.47 lakh while commercial vehicle sales fell 4 percent to 41,221.

Out of this, exports sales stood 1.45 lakh, down 12 percent from 1.66 lakh year-on-year (YoY), the company informed exchanges. While domestic sales jumped 17 percent to 1.44 lakh units, boosted by new launches such as the Avenger.

Fiscal-year-to-date (April-December 2015), Bajaj sold a cumulative 30.2 lakh units, compared to 30.3 in the same period last year."As far as exports are concerned, we're doing very well at the retail level [in these markets]," Bajaj President Finance Kevin D'Sa told CNBC-TV18. "The problem we're facing is dollar availability for these countries."Some of Bajaj's key markets, such as Nigeria and Egypt in Africa, have witnessed macro-economic troubles, with some witnessing currency devaluation."With the recent Fed rate hike, we should continue to see some headwinds in January. But things should be okay from February-March onwards," D'Sa said.The company expects exports to improve in the first quarter of the calendar year but the executive said that would partially be a statistical improvement, when compared year-on-year, following similar export troubles in Egypt last year."We have a target of 1.6 lakh units for exports, which we believe should happen from March onwards, as we expect dollar availability to improve," D'Sa said.Below is the verbatim transcript of Kevin Dsa’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: It is a diametrically opposite scenario that we are looking at. On one hand domestic sales are improving because of the new Avenger but on the other hand exports continue to slow down. So, first let us talk about the weak pocket which is exports. Which are the markets that have been under pressure in the month gone by and do you see more pressure in the months to come? A: Let me put it this way, as far as the exports are concerned at the retail level we are doing exceedingly well so, while many other people do feel a fear of the markets in Nigeria etc, the oil producing countries I am happy to inform you that we had a record retail sales of Nigeria for over 60,000 in month of December, which is a record. For us the basic problem is the availability of currency in these markets. Now given the fact that the retails are taking place our market share has gone up in all these markets. You take Egypt for example, again a record sales but the point and the problem that we are facing is the dollar availability for these countries. My own belief is I expect now with the Fed rate coming in and things stabilising etc one should see a little bit more of a little bit of a headwind in January but from February – Match onwards we should be okay. The interesting point to see is that in all these markets our market share actually has gone up. In Nigeria the market share has gone up to 63 percent. So, we are pretty comfortable on that side of the retail end. In this month we I would say that we lost out primarily in Egypt again because of the availability of the currency and Nepal continues to be a problem for us.Latha: What is your sense when your export numbers will start showing a year-on-year growth? Does that happen in January or February?A: I would say it is more in February and March, again I were to be very blunt and frank, I think the growth will show in February and March because last quarter of the last year we had similar problems in Egypt. So, for us I would say that the growth will start in February- March but what we would like to look at a figure of 1,60,000 numbers or so which we believe will happen from March onwards when things should stabilise in availability of dollars. Latha: This confidence that dollar availability in your export destinations will improve stems from what? Things are only getting worse in terms of commodity prices.A: That is why I said at this particular point of time; it is only a belief and nothing substantial to share with you. However, things are improving in terms of the certain currencies availability of dollar that we are getting feedback from the distributors.Latha: What is going right in the domestic sales? 17 percent is flattering, how do you think the dealer responses has been for January? A: If you see the strategies if you have unfolded I had mentioned to the people at large was basically concentrating on the lower and the M1 segment with the CT added in the Platina and at the higher end segment with the Pulsar RS200 as well as the Avenger. If you recollect in November when I came on your show I had very confidently told you that the Avenger is going to be a success and you did ask me the question as why are we so confident. The answer is that completely again a part of the strategy is a differentiated product. So, from 3,000 numbers of Avenger that we did in December 2014 we have hit 20,000 numbers in this month. My estimate when I spoke to you at that time was I would look at about a 18,000-20,000 numbers of Avenger. However, despite the fact that this being the month of December which is a yearend month etc where sales are down, Avenger has really rocketed to 20,000 sales with a huge amount of pending orders. Keeping this in mind we are actually expanding our capacity and targeting somewhere near close to 30,000 numbers in March.Sonia: So 30,000 number of Avenger in March.A: This is the production capacity.Sonia: You had said that production capacity was 20,000 earlier so you are going to hike it to 30,000 by the month of March, is that correct? A: That is right because we believe the potential for selling those numbers of Avenger is very much there. As you know the numbers that we are talking about right now is primarily in the domestic market nothing yet for the exports. Sonia: I wanted one clarification on the export market. You had said that these Egypt and Nepal markets have continued to slowdown. What about Latin America where you get 20 percent of your exports from, how has that market done in the month gone by?A: Billing to Nepal and Egypt has been affected. Retail at Egypt is very high and most of the dealerships are probably stock out. So, the problem for Egypt is again the availability of dollars. In the case of Nigeria for example we have build 50,000 numbers and we retain 60,000 numbers. Now coming to Latin America the sales continues to be normal and therefore if you actually have to look at the figure of sales as compared to the last year where we did approximately 160 as against the 150 or 145 that we did this year is primarily like I mentioned to you the 8,000 or so vehicles would have lost in Egypt because of the availability and dollars and 4,000-5,000 numbers on Nepal. Latha: What is the situation in Nepal, is that improving?A: There is not much of a significant improvement. Again it is more of government to government situation and nothing to do with the retail or demand for the products.Latha: What about the three-wheeler products that as well was a bit disappointing?A: No, let me put the three-wheeler in right perspective. Let us talk about the domestic numbers. We grew by 43 percent and that to our three-wheeler domestic has grown up on 23,000 numbers as against 16,000 numbers of last year, last December. In the month of December normally you have a big problem in terms of registration but we have actually taken our market share up from 41 percent to 50 percent in December. Our diesel where we have put in effort has actually gone up by 3 percentage points in market share. Overall our market share in three-wheeler has gone up from 41-50 percent with clean fuels going up from 87 percent to 91 percent. So, three-wheeler has been a great story for us in the month of December. This also keep in mind that we had a 1,000 vehicles pending orders for which our funds were available. However, we didn’t dispatch it because of the month-end closure. Sonia: So, now you are three-wheeler market share stands at 50 percent, is that correct? A: For the month of December it is at 50 percent. Sonia: You had said that the export numbers will go to 1.65 lakh by the month of March. Can you give us the similar indication of what the domestic numbers could be currently you have done about 1.44 lakh in domestic given that the Avenger doing so well by the month of March how much do you think domestic could rise to?A: My estimate is you see there is another big model that is coming out. Again I will repeat myself that the strategy that the company announced one was the CT Platina which was at the M1 segment, the other was in the sport segment these two strategies have panned out. Now we will be playing the big strategy in the commuter segment with an all new brand that we will launch in mid February.We believe that will be another big turnaround and bring a big change in the market. My estimate for the month of March would be somewhere near the 1,80,000 numbers of domestic motorcycles crossing 2,00,000 as an average in the first quarter of the financial year FY17. Latha: I guess margins also are set to improve?A: Margins I have always maintained we don’t look at quarter-to quarter margins but if you see for the last four years every quarter our margins has been in excess of 20 percent and given the fact 80 percent of our products generate margin an excess of 20 percent I don’t see that being under pressure for the near-term.Sonia: What is the overall market share right now in the domestic market and how much has it changed in the last couple of months?A: I don’t have the figures of the competition right now. So, I would believe that the fact that the industry has slowed down and we have grown up our market share should have improved a bit but like I said I don’t have competitive data. My estimate is we would be somewhere near the 17.5 percent as of now, up from 15 percent last year. Going forward, I would still very confident of it closing in at closed to 20 percent by March exit point.