Motorcycle market to remain tough, says Rahul Bajaj

With no improvement in demand in sight, Bajaj Auto Chairman Rahul Bajaj has warned of a tough environment ahead for the motorcycle market. In 2012-13, Bajaj Auto, the largest exporter of two- and three-wheelers in India, recorded a fall of two per cent in domestic and export sales, after three consecutive years of growth.

In his comment in the company’s sixth annual report, Rahul Bajaj said, “Despite being an optimist, I do not see signs of a substantial recovery in the near future yet. The decline in growth may have bottomed out, but incremental growth will be modest…In such an environment, the domestic market for motorcycles will be very tough. Your company will have to fight to gain market share, and do so in ways that do not erode its healthy Ebitda (earnings before interest, tax, depreciation and amortisation) margin. The management and employees of Bajaj Auto, led by Rajiv Bajaj, have more than enough capability to meet the challenge.”

Last year, the Pune-based company reported sales of 3.75 million units. At 2.46 million, domestic motorcycle sales reported a decline of four per cent. Market share in the domestic motorcycle segment stood at 24.4 per cent, against 25.4 per cent in the previous year.

“Urban, as well as rural markets were affected by relatively high interest rates on consumer loans, high inflation and a deep sense of uncertainty. Consumer durables purchase decisions were pushed back and motorcycles were no exception. This was particularly true of models in the upper-end performance segment, which represents a substantial proportion of Bajaj Auto’s motorcycle business,” the report said.

Last year, the company’s three-wheelers, too, took a knock, declining seven per cent to 4,80,057 units. This was largely due to a fall in exports. Tough market conditions in Sri Lanka stifled export demand.

The company has decided to exit the cargo three-wheeler segment and focus solely on the passenger segment. Last year, the company pushed new motorcycle models such as Pulsar 200NS, Discover 125ST and Discover 100T.

PT Bajaj Auto Indonesia, a subsidiary company, reported losses had doubled to Rs 24 crore and motorcycle sales had halved to 11,198 units. Owing to losses, Bajaj Auto has further impaired its investments in PT Bajaj Auto Indonesia by Rs 35.52 crore. In 2010-11, there was an impairment provision of Rs 102.27 crore.

Now, the total impairment provision stands at Rs 137.79 crore.

In September 2012, Bajaj Auto had announced a distribution arrangement with Kawasaki Motors to market and distribute Pulsar NS motorcycles in Indonesia. It was expected this would boost exports to Indonesia from the second half of 2013-14, the report said.