Bajaj Auto Limited posted a record turnover in its quarterly results announced today. As the country’s second largest two-wheeler maker, Pune-based BAL is looking at growing business not merely from increasing volumes, its managing director Rajiv Bajaj tells Sharmistha Mukherjee. Excerpts:
Sales in the domestic motorcycle market grew by 17.42 per cent till September this financial year. Bajaj Auto motorcycle sales have grown by around nine per cent in this period. Is it a deliberate strategy to focus on exports?
There are two reasons why our sales growth seems to have been moderate. Last year, up until November Hero MotoCorp, which is the largest player in the segment, had capacity constraints. After those were resolved, from December onwards they were able to produce and therefore sell more. So, between April and November, BAL apparently gained market share. Now it looks like we have lost it. It is not a question of market share, but of the individual companies’ capacity.
Secondly, we are not trying to reduce our dependence on the domestic market, but on the lower-end of the domestic motorcycle market. The motorcycle segment is growing unlike passenger cars. But the rate is still lower than last year. Some companies are trying to push sales through promotions and discounts. Our strategy is to sell as much of Pulsar and Discover as we can. We will not reduce price to increase volumes. We may have lower growth, but we will maintain profitability. Our second-quarter Ebitda margins have grown to 20.1 per cent. It is best in the industry.
Bajaj introduced a 150 cc motorcycle the Boxer to gain entry-level customers earlier in August this year. Will you not focus on the mass segment at all?
We like to focus on products priced above Rs 45,000-50,000. We have a strong presence with up-market models because they make more money. Boxer is a 150cc motorcycle but it is a simple product. Unlike, Discover and Pulsar it does not have high-end features like disc brakes. It is a workhorse meant for strong, rugged conditions. It has been priced at Rs 42000. Our competitors have products in the commuter segment priced between Rs 33,000 and Rs 35,000. So we have started cautiously with the product. This is only the third month since launch, we are selling 5000-10,000 units every month. But we are happy with the response. There are also some limitations in capacity available for producing more units at the moment.
Bajaj is operating its plants at full capacity at present. You have mentioned the need for a new plant. Is it likely to come up soon?
We are waiting and watching the market. Currently, we have installed capacity to produce 375,000 motorcycles and 50,000 commercial vehicles every month. We are operating at more than 90 per cent of our capacity so our profitability is high. We should set up a new plant, Gujarat is a likely alternative. But the economic conditions are so uncertain that we want to be prudent and see how the market develops. If there is a meltdown, we don’t want to be caught on the wrong foot.
Commercial vehicle sales for Bajaj have declined by nine per cent in the domestic market. What is causing the setback?
Fundamentally, CV sales in India are determined by permits. Except for Gujarat which has made free sale possible, all other big markets for CVs be it Delhi, Maharashtra, Andhra Pradesh or Tamil Nadu have restrictions on issuing permits. This has limited the sales. But the industry degrowth has been more than ours, so we managed to increase our market share. We are focusing on exports to boost CV sales. Our overseas sales of commercial vehicles have gone up by 44 per cent.
Given the current market conditions, what is your outlook for the current financial year?
When we started the year, we had given a guidance that we would grow our turnover and maintain our operating margins at around 20 per cent. We have been able to achieve this in the first six months. I am confident we will be able to keep the momentum.
