Bajaj Auto 'very confident' super premium motorcycles to keep strong run

Pune based firm will invest Rs 650 crore in a new facility in Chakan near Pune for the segment

The Covid-19 pandemic and other disruptions have given the two-wheeler market in India a push-back, but Bajaj Auto remains optimistic about the super premium motorcycle market continuing its strong run. The segment has shown resilience for the company and will continue to grow in high double digits, said the company’s top executive.

“Year-to-date, our super premium portfolio (includes Dominar, KTM, e-Chetak, and Husqvarna models) has proven to be quite resilient and grown 24 per cent year-on-year (YoY),” said Rakesh Sharma, executive director, Bajaj Auto.

This is in sharp contrast to the overall motorcycle business of Bajaj that has declined 21 per cent YoY in the same period.

Even in overseas developed markets like North America and Australia, the segment has seen an accelerated boom in times of Covid, he added. “We are confident that the double-digit growth will sustain,” reiterated Sharma.  

Buoyed by the prospects of the road ahead, earlier this week, the Pune-based firm said it would invest Rs 650 crore in a new facility in Chakan near Pune.

With an annual capacity of 1 million units, it will produce its super premium brands, including KTM, Triumph, Husqvarna, and e-Chetak. The facility will go on stream in the second half of 2022-23.

Bajaj’s existing facility in Chakan, which makes these models, now has an annual capacity of 1.2 million units. One in every two motorcycles produced by Bajaj’s Aurangabad and Chakan plants is exported. Of this, Chakan makes 30 models of high-end bikes: these are exported to 70 countries, including mature markets like Japan and the US.

“The current capacity will not be able to service the requirements if you take into account the seasonality in demand in export and domestic markets and electric two-wheeler portfolio we expect to build,” said Sharma. But the overall sales trend in the domestic market worries him.

December retails have come close to last year’s levels. But the underlying demand remains weak, he said. It has come on a low base — retail sales in the domestic market declined 18-20 per cent in 2019-20.

“Even if we match last year’s levels as an industry, we will still be at 2013-14 levels. That’s how serious the decline has been. It will take us at least three years to get back to 2018-19 levels,” said Sharma. This is attributable partly to Covid and partly to regulatory and policy changes.

On the exports front, at a consolidated level, most of the company’s destination markets, including Latin America, Association of Southeast Asian Nations, have reached 80-85 per cent of pre-Covid levels. The excess stock has cleared and stock-building has started. Bajaj expects to see growth in the coming months. It expects to close the current financial year at 2-million-plus exports.

“Going by what we have seen in the past few months, the exports are coming back very smartly. It would have been better had it not been for the disruptions related to supplies, containers, etc,” said Sharma.

While managing cost-side issues is not a big challenge, uncertainties can be frustrating, he added. For instance, the lead time for organising a container earlier was two days. It has now gone up to 50 days.