Note ban pain not over; base effect lifted exports: Bajaj Auto

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The demonetisation impact has not fully subsided and two-wheeler companies might continue to feel the pain for a few more months, according to S Ravikumar, President-Business Development at Bajaj Auto
.

The 16 percent jump in exports is largely due to a base effect, he said, pointing out it is good that the numbers have held up around 1.1 lakh units for the last three months. The company has started shipments to Malaysia and the new market expansion might gradually help in adding to export numbers, he said.

Bajaj’s total February sales were fractionally up year-on-year at 2.73 lakh units from 2.72 lakh. However, exports were up 16 percent at 1.1 Lakh units.

While acknowledging the competitor Royal Enfield, he said, in-house Dominar is also being well-retailed and well-received in the market.

On possible cannibalisation by KTM Duke bikes, he said all products have been launched based on niche customer categories and are unlikely to eat into each others business.

Below is the verbatim transcript of S Ravikumar’s interview to Latha Venkatesh, & Anuj Singhal.

Anuj: Exports number is looking good and the market like that but would it be too early to cheer. What is your take? How is the future looking like as of now?

A: As far as exports is concerned, what you are seeing is certainly a base effect over last year, so the fact is that at about 115,000 plus-minus type of a number, for the last  three months things are holding at that level – that is a good news. It is not falling. However, retail also very much at that levels. So in the various markets whatever we are pushing out is getting well retailed – that’s one.

The second thing on exports is we have recently started shipments to Malaysia. So new market expansion is happening. However, I would say I would be neutral, the numbers will hold 115,000 plus-minus levels but the 16 percent growth that is shown is because of the base effect.

Latha: You are expecting 115,000 for how long. Do you see it improving because commodity producing countries should be doing better including the likes of Nigeria? Is this for the first half that you are guiding? For the full year – do you think we can do better than 115,000?

A: We will talk about the next year and the estimates for the next year when we talk again in April with the March numbers, but before that not hazard a guess on those numbers.

Latha: Domestics – has life returned to normalcy. Are you anywhere near the October levels?

A: No, not all in fact certainly for the two-wheeler industry, the demonetisation effects are still panning out and it will take a few more months.

As far as Bajaj is concerned, there are no surprises. We have very well handled BSIII-BSIV issue. We are supplying to the market only what the market takes, so there is no build-up in the stocks and things like that but if I look at some of the competition numbers, I find, for example  Hero Motocorp
just about managing to show a higher retail, slightly more than what it was last year February. Similarly Honda Motorcycle and Scooter India (HMSI), I find that it’s about 120,000 type of a number but TVS Motor Company
has corrected further, it has gone down to 28. There are two things which are at play. One, what we are seeing is only the wholesale number. On the ground that may not be the story, people maybe building stocks, people may be forced to build stock because of their own position vis-à-vis BSIII-BSIV. Some people may not be ready, some people may be producing more of BSIII in the hope that it will washout in March and they have to push into the system and if they are stuck in that type of a role. So from these wholesale numbers it is very difficult to discern but I would rather wait for things to normalise but on the ground the demonetisation bug is still there, it has still not gone.

Latha: How is your 400cc bike performing?

A: Dominar did a good number this time, about 3,300 units and that is being retailed very well, everywhere it is being received very well, customers are very happy. It is a nice product at that price point of 400cc and it is well differentiated. It will make its mark very well on course there.

Anuj: KTM Duke’s higher cc version has been launched. I do not understand what is happening in this space. Is it just getting out more models because cannibalisation is a bit of a risk factor?

A: The brands are so very well differentiated and they stick out so nicely. KTM is ready to rise. There is a clear customer base for that and I do not think there will be any cannibalisation there.

Latha: You have done month-on-month better since December – 2.25-2.4 and now 2.7. Are your stockists telling you or your retailers telling you that you can at least keep this inching up? Do you get to 2.8 and 2.9 in the coming months or even in this month itself?

A: We will certainly be looking at that inching up. Month-on-month growth is certainly there, for example domestic from about 120 we are at 142 in motorcycles. The three-wheeler story is a bit more subdued, cash weightage is there a bit more but that said Maharashtra permits – some of the litigations are all getting sorted out and we are hopeful that Maharashtra permits will open up. So things will be positive from December like you said things are improving but we could have done much better had this demonetisation not hit us