Semiconductor shortage hurts business, impact of Russia-Ukraine war minimal: Rakesh Sharma of Bajaj Auto

The semiconductor shortage is hurting the entire portfolio of Bajaj Auto, and it is not only the premium segment that is affected but also the three-wheeler business, says Rakesh Sharma, the executive director of the company.

In an exclusive interview with CNBC-TV18, Sharma talked about the sales picture, semiconductor shortage and impact on business due to the Russia-Ukraine conflict.

Bajaj Auto is the top Nifty loser today as the company posted very weak sales for February. The company reported a 16 percent drop in its total sales to 3,16,020 units in February.

When asked about motorcycles sales which were down 17 percent, Sharma said, "The retail weakness is certainly continuing and while the numbers for the industry are just rolling in, we are estimating that the industry is again in for a decline of about 13-15 percent over last February (2021)."

"Our particular issue is explained by an aggravation of shortage on the semiconductor side where we were facing a shortage in January, but there has been a greater disruption for us as one of our key suppliers faced huge shortfalls which got passed on to us and consequently we were like about 30 percent requirement levels atleast in the domestic side of things," he noted.

Sharma also said the direct impact of the ongoing war between Ukraine and Russia is absolutely minimal. "We do have distribution arrangement in Ukraine and we have been getting news from our distribution partner that we are well but in a very difficult shape. The direct impact in decimal points but we have to wait and see how it impacts the other microeconomic factors, currency, etc," he pointed out.

Speaking about the recovery of domestic markets and rural distress, he said, "The semiconductor issue is affecting our entire portfolio, it's not just the premium end but also the 3 wheelers (segment) is affected by semiconductor shortage."

"The Quarter 3 January and February are very similar, they are in double-digit decline at an industry level and I'm basing these numbers on one registration, which I would say is the most accurate reflection of what's happening in the industry."

He further added that the entry level is declining a little bit more because that is the most economically weakened customer. At the top end also there is a decline because the prices have risen disproportionately thanks to precious metals pressure as well as the regulatory requirement. The middle is performing better as it is declining less than the top and the bottom.

When asked about the declining trends in exports and what particular markets are getting hit, Sharma said that it is a seasonal trend.

"This is a very seasonal trend. Most of the export markets peak around Christmas time and then picks up by the middle of the calendar year. So this is a very natural movement. The overseas markets are doing very well and the numbers are just the seasonal thing."