Bajaj Auto Sees Demand Recovery In India; EMs To Take 3-4 Months


Bajaj Auto Ltd. has been seeing a turnaround in domestic demand since the festive season, though December was weak, according to its Executive Director Rakesh Sharma.

“Until October 2022, we were experiencing negative growth in the motorcycle industry in the domestic market. Now, the industry is back to 3% growth, which is good after a constant decline that we have seen over the last two years,” Sharma told BQ Prime.

Emerging markets are expected to take at least three to four months to start settling, and for pent-up demand to pick up, he said.  

Growth Outlook

The industry can be divided into two halves—100 CC and above 125 CC, he said. Growth in above 125 CC segment is nearly 3-4 times the growth rate of 100 CC, according to him.

“Industry is witnessing low single-digit growth in 100 CC. However, it is being powered by the growth we are witnessing in the above 125 CC segment.”

In terms of the domestic three-wheeler segment, Sharma said that there is a “smart recovery” and they have reached 75% of pre-Covid volume levels.

“Growth in the three-wheeler segment is driven by growing CNG network, and the shift happening from diesel to CNG. CNG is 65% of the industry, from 20% two years back. Bajaj Auto has a market share of 86% in CNG three-wheeler segment,” he said.

Rural demand is soft and premiumisation is aiding growth so far, he said.

According to him, the movement of three-wheelers to electric is happening in the e-rickshaw segment, which is putting pressure on the auto segment. The company is making inroads in north and east, he said.

“(In) regular auto segment, we are not seeing electric penetration as much as in two-wheelers.”

Sharma said that the company’s e-auto is under trial and there may be a selective launch by end of March in the segment.

Two-wheeler electric is making great strides in terms of penetration in the domestic market, he said. “Bajaj Auto is setting up an independent network which is dedicated to the electric segment. Due to supply chain clarity, we are expanding our electric network and aim to be in about 85 cities by March 2023. We will also expand our Chetak portfolio in FY24,” he said.

Emerging markets are reeling under inflation due to share devaluation of their currency compared to the U.S. dollar, Sharma said. Purchasing power is eroded and demand is down nearly 30% since May 2022, he said.

However, Sharma said he is seeing demand “settling down and maintaining equilibrium”.

“The major concern is not demand any more; it is the availability of dollars. Also, Nigeria is in a precarious situation, as they have elections on Feb. 25 and they also undertook demonetization. It hit Bajaj Auto as Nigeria contributes 25% of the company’s revenues,” he said.

According to him, competitive intensity will remain high in the two-wheeler space.

Taking cues from the commodity price surge in Q2 FY23, Bajaj Auto pre-emptively took price hikes in Q3 FY23, he said. However, they are not getting any indications of price increases in the commodity space, except in aluminium and nickel, Sharma said.

He also does not expect the rupee to appreciate significantly.

“Surge in profitability in Q3 FY23 was due to the richer product mix. Current portfolio of 20 different models in 125-500 CC segment is being well-accepted by consumers, whereas the next competitor has 13-14 models in the same segment. The company’s average selling price and margins are better than the core portfolio, which will aid company’s growth.”

Talking about the Bajaj Auto-Triumph JV, Sharma said that it is much bigger than Bajaj Auto-KTM partnership. “If Triumph and Bajaj are able to replicate the outcomes which Bajaj-KTM have achieved, it will be much bigger. We will start seeing positive impact from FY24 onwards.”


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