Bajaj Auto: Volumes skid

The lack of financing options for customers in a tight credit market has hit Bajaj Auto hard. The firm’s motorcycles volumes were up 9 per cent in the six months to September 2008, which, in hindsight, seems to be reasonably good because volumes for November have fallen a sharp 37 per cent.

Of course, volumes had been weak in October too with the fall at 34 per cent. To combat the situation, sister concern Bajaj Auto Finance has come up with a low interest scheme which would be available across 300 dealers. But unless interest rates come off meaningfully, and banks make money available to buyers, it’s unlikely that two-wheeler sales will pick up in a hurry.

It’s not just the lack of access to credit that’s keeping buyers away; the general slowdown in the economy is making consumers more cautious about spending. That’s the reason why owners are not replacing their bikes — industry analysts point out that the replacement cycle has lengthened. Unlike peer Hero Honda, whose sales have been skewed towards rural markets, the better part of Bajaj Auto’s sales of motorcycles have typically found buyers in urban markets.

Over the past few months, the Pune-headquartered firm has been losing market share to Hero Honda, which has managed to do well by cashing in first on the festive season and, thereafter, the wedding season. It’s not that Hero Honda hasn’t been hurt by the lack of financing options — the proportion of sales sold through such schemes has come off to 40 per cent from 60 per cent earlier. But the company has nonetheless managed to gain market share in the premium segment.

The Rs 9,046 crore Bajaj Auto too plans six launches in the next six months and is hoping that will help boost sales. The company might just manage to grow revenues for the current year by about 6-7 per cent, if sales pick up in the March 2008 quarter. In the first six months, revenues were up approximately 9 per cent at Rs 4,856 crore. However, net profits for the year could be lower than the Rs 869 crore posted in 2007-08.