Moneycontrol
Last Updated : Jan 11, 2018 04:12 PM IST | Source: CNBC-TV18

Expect 'V' brand bike sales to increase to 15000 units per month: Bajaj Auto

Bajaj Auto has re-launched the Discover in the economy bike segment, with a 110 cc engine; they also launched an upgraded Discover 125. In an interview to CNBC-TV18, Eric Vas, President-Motorcycle Business at Bajaj Auto spoke at length about the launch and gave his outlook for the future.

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Bajaj Auto has re-launched the Discover in the economy bike segment, with a 110 cc engine; they also launched an upgraded Discover 125. In an interview to CNBC-TV18, Eric Vas, President-Motorcycle Business at Bajaj Auto spoke at length about the launch and gave his outlook for the future.

Vas said we have had a consistent market share for six-seven quarters.

He further said that we will expand market share by 400-500 bps post launch of new Discover bikes.

The company has been weak in the executive segment for three years, he added.

We have had missteps with regards to Discover brand in the past. However, have found a solution to problems, Vas mentioned.

He further mentioned that we have been selling over 8,000 units of Discover a month for last two-and-a-half years.

Talking about 'V' series, he said we expect 'V' brand bike sales to increase to 15,000 units per month.

According to him, there is a revival of demand; broad-based rural and urban demand growth is seen.

We look forward to February and March being much better than last year, said Vaz.

Below is the verbatim transcript of the interview:

Q: Everyone knows that the motorcycle business of Bajaj Auto has been on a downtrend for the past few months, in fact if you look at what you did in December - 2.28 lakh units - that compares to about 3.5 lakh that you saw a couple of months ago. What will the new launches, the new Discovers do to bring to an end the kind of downfall we have seen in motorcycle sales?

A: I would say that we not really had a downfall. What you have seen is a combined number of domestic and international and both of these are very different from each other.

The international market moves with commodity price cycles and the dynamics there are very different from the domestic market. If you look at the domestic market, you will find that we have a very different play domestically. We have had a consistent market share, if you look at the last six-seven quarters. Going back to Q1 of the last fiscal, we have had 18-17 percent market share. Yes, there was a minor drop in November and December but that was by design because we were transiting to certain new products, one of which we launched. So we have had a consistent market share of around 18 percent right through this and we will now, with the new product that we have launched, the Discover 110 and the new Discover 125, we would be in a position to grow this by around 400-500 bps over the next four quarters or so.

Q: But the market share just in the executive segment has fallen drastically, right. It was about 20 percent five years back, if I am not wrong, and now it has come to low single digits - that is because the Discover brand had been diluted so much over the last many years. So I am just trying to understand what will change this time?

A: That is a correct observation. We have been very weak in the executive segment for the last two-and-a-half-three years and the new Discovers which have been launched is our solution to what had happened to the Discover brand. As a company we always try to move our brands ahead. I think we have got it right in six out of seven brands. In one brand which is Discover, we probably had a couple of missteps three-and-a-half-four years ago which we have been in the process of correcting and what you see in the new Discovers is our solution to the problems we had in a very large part of the domestic market.

The executive segment, just to give number, is a combination of the premium 100cc bikes and 110cc bikes and 125cc bikes. It is roughly half the domestic market. So that is a segment where we had a very low market share of less than 5 percent. In the other segments which are the entry level segments and in the sports bike and the higher capacity bikes, Bajaj Auto enjoys fairly high market share through our other brands and through KTM which is our affiliate company. In this large executive segment the Discover brand is our offering and the re-launch should give us around 400-500 bps market share gain in the overall market.

Q: In 100, 110, 125 segment that you are talking about, do you expect your market share to go from under 5 percent to close to 10 percent?

A: Yes that is our endeavour. We never had 110cc bike in the last five years, so that is a completely new play for us and with a product we have, we think we can gain significant market share. We had 125cc bike; for the last two-and-a-half years we have not invested behind the Discover brand from marketing point of view while we have been retooling the brand and reworking the product portfolio. We have been very silent in the market. Despite that the Discover has continued to sell more than 8,000 vehicles every month for the last two-and-a-half years. So, with the new offerings we hope to gain disproportionately in both - the 125cc and 110cc. So, 500 bps market share gain is eminently possible for Bajaj Auto.

Q: To overcome the slowdown in the Discover brand, Bajaj Auto had launched a whole host of new brands. You had the 'V' series as well, the Avenger, Dominar, but we have seen the run rate over there fall considerably. If you look at the 'V' series, from a peak of 32,000 in May 2016, it is just about 7,000-8,000 a couple of months ago. Avenger sales have also fallen substantially from the peak. You guys mentioned that you are curtailing production here but should we expect lower sales run rate from these products - the 'V' series as well as the Avenger going forward?

A: Yes we do. I will take the 'V' series first; when we launched the Bajaj V, we had worked on upgrading a commuter customer to 150cc bike. It was 150cc commuter bike. We have discovered that that upgrade is extremely hard because they tend to stay to 125cc capacity. So the 'V' has a successful play as 150cc bike. It sells around 10,000 number a month on an annualised basis and we have made some product correction which we put into the market from December onwards in terms of certain features that customer demanded. We have seen better traction in December and then we saw even in October and September. So we believe that the 'V' brand can go to around 15,000 number as 150cc bike.

Coming to Avenger, the Avenger had a run rate of approximately 15,000. We have deliberately over the last two-and-a-half months reduced the run rate as we are going to introduce new Avenger very shortly into the market. It was displayed at unveil but we have not yet announced the features and prices for the new Avenger. I think you will see that run rate come back to around 15,000 bikes. So that will be incremental for us over what we are right now and other 5,000 numbers from 'V' and another 5,000 numbers from current run rate for the Avenger and that is a good position to be for those bikes and those formats.

Q: When I spoke to you last month, you indicated that the retail trends were very weak - that is the month of December. How is the month of January looking and what about February and March? What can we expect in terms of two-wheeler retails?

A: When we spoke last month the retail was fairly slow but towards the end of December there was a significant spurt in retail that took place. I think driven by a lot of the activity that the entire two-wheeler industry undertook.

When we look at January, the retails are significantly above January last year and at a total industry level Q3 has done reasonably well. So we are seeing certain positive growth signs in the market, there is a revival of demand which is fairly broad based across both rural and urban markets. Of course most of the demand is concentrated on specific segments in the industry but that broad based lift in demand is good for us and I look forward to both February and March being much better than February and March last year.
First Published on Jan 11, 2018 12:32 pm

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