Swaraj Baggonkar Moneycontrol News
Bajaj Auto has eaten away nearly 300 basis points in market share from rivals Hero, Honda and TVS Motor in merely five months since it cut prices of its budget bike CT100.
The Pune-based company now commands a share of nearly 16 percent in the segment of bikes with engines up to 110cc from 13 percent before the price cut.
Bajaj had cut prices of the CT100 by Rs 2,000 at the end of March making it the cheapest geared two-wheeler in the country. The 100cc bike is priced at Rs 32,000 (ex-showroom, Mumbai).
While market leader Hero MotoCorp refused to join the price war, Honda, the second largest two-wheeler maker said it is already running its capacities at optimum level leaving no scope to push volumes further.
Speaking to Moneycontrol, Minoru Kato, President and CEO, Honda Motorcycle and Scooter India, said there is no need for the company to push volumes at the lower end of the budget bike segment and that discounting cannot be the long-term strategy for any player.
“We don’t know competitor’s financial background or their strategy. But as a manufacturer, we have the facility. We have made big investments into fixed assets. To fulfil the capacity of the factory that is one of the important strategies, to improve the business situation. Price-wise, based on the market and customer value, profitability is the most important factor," said Kato.
Honda sells Dream Yuga, Dream Neo, CD 110 and Livo in the category.
"Normally the discount strategy is a function of the gap between the company’s expectation and real situation. Then in order to reduce the inventory, everybody considers discounting. But in case of Honda our factories are running at full capacity," said Kato.
Honda’s share in the up to 110cc segment slipped to 6.18 percent at the end of August from 7.51 percent at the end of March. Hero’s share came down to 73.68 percent from 74.51 percent during the two comparable periods. TVS too marked a fall to 4.33 percent from 5.14 percent.
Led by Activa, at least 66 percent of Honda‘s domestic volumes come from scooters while motorcycles make up the rest. Earlier this month, Honda announced plans to set up new production lines at its Gujarat plant to add 600,000 units and push the overall capacity to 7 million units by 2020.
“Bajaj gets profitability from exports besides three-wheelers. But they don’t have scooters. Then some dealer in a big city has been struggling because they do not have a line-up of automatic scooters. That is one of the reasons why they have to push the CT100 to make up for the loss in volumes," said a Honda executive.
The 100-110cc bike segment is extremely price-sensitive. Buyers of such two-wheelers are centred majorly in the rural and semi-rural pockets making up about 60-70 percent of their total volume. Rural demand has been stronger this year thanks to near normal monsoon last year giving a boost to agricultural yield.
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