Rise in input costs not to impact profits: Bajaj Auto

The country's second largest bike-maker Bajaj Auto today said that the rise in input costs, for commodities such as steel and rubber, was unlikely to eat into the profit margins of the firm due to a shift in consumer preference towards more expensive offerings.

While claiming that the two-wheeler major was cushioned against dramatic price fluctuations through standard half-yearly contracts for major input requirements, S Sridhar, Bajaj Auto Chief Executive Officer (2-Wheelers) explained that the majority of sales were taking place in the mid-priced section.

“Unlike last year, when the size of the entry-level market was larger, this fiscal consumers have been shifting towards the higher (priced) category. As a result, the margins are better. We have been able to benefit from our portfolio,” Sridhar said.

On a monthly average, Bajaj sells about 55,000 bikes under the Pulsar tag, which starts from Rs 60,000.

Another 90,000 two-wheelers from the Discover brand, starting from Rs 41,000, and 40,000 units of the Platina selections, priced at Rs 33,000 and above, are sold every month.

“But about 70-80 per cent of Hero Honda sales happen in the low-end (in pricing terms) of the market,” Sridhar added. Hero Honda is India's largest bike-maker, and Bajaj Auto's primary rival for the domestic market. Sridhar said that EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) had improved year-on-year, and the firm's target this fiscal would be to keep this number at or above 20 per cent.

Meanwhile, on Bajaj Auto's collaboration with Austria's KTM, he said that jointly developed motorcycles are expected to hit the domestic market next fiscal, subsequent to their European debut later this year.