Media Interview: Mr Rajiv Bajaj, MD – Bajaj Auto: Slow growth in 2W industry to continue in April-June.

Bajaj Auto , India’s second largest two-wheeler maker reported a 10 % year-on-year decline in sales in March at 3.01 lakh units amid continued sluggish demand for motorcycles. Rajiv Bajaj, MD of the company feels the market for auto sector remains quite challenging and expects growth in April-June to be between 0- and -5 %. Talking about the targets for the next fiscal, Bajaj says the company would try to strike double digit growth and get closer to 5 million (50 lakh) vehicle sales. However, it is going to be a bumpy road, given the sluggish growth in the two-wheeler market seen at least in April-June and pressures in some of Bajaj Auto’s markets like Sri Lanka, Bangladesh and Egypt, which are key regions for three-wheelers.

Below is the verbatim transcript of Rajiv Bajaj’s interview on CNBC-TV18

Q: You are down about 9 to 10 % both month on month and year on year, does the market still remains very challenging?

A: Yes, that is true. In March, the motorcycle were at 2,70,000 versus 3,00,000 March 2012. So, you are quite right when you say minus 10 %. Commercial vehicles (CVs) are more or less flat at 34,000 versus 35,000 reflecting the state of the industry.

Q: What is happening in motorcycles? Is it just sluggishness in demand or is there market share loss issue that is creeping in with Honda’s aggression?

A: If we look at the year as a whole, Hero has yielded some market share in motorcycles to Honda and that is the only real big shift. I don’t think any other player like Bajaj, TVS , Yamaha has gained or lost much. In the scooter market share, Hero has gained from Honda Motorcycle & Scooter India (HMSI). Some of Hero’s motorcycle customers have moved to their scooters, some of Honda’s scooters customers have moved to their motorcycle. I wonder if anybody has lost or gained from anyone else.

Q: 2.70 or 2.67 lakh motorcycles that you clocked this month, could it have been lower than your expectations? Which segments have been sub-par?

A: Yes, March. I wouldn’t say it is lower than expectation, but it is lower than how the year has been. For example, for the year as a whole we have done close to 3.8 million motorcycles so that is clearly over 300,000 a month, whereas March is below that. There is only one clear reason; it is due to the season and the sentiment. Last year March was big for Gudi Padwa and Navratri, a big festival especially in the western part of the country. It has now moved to April this year and that explains to a large degree, the shift of some of the sales from March to April and one will see the trend across the industry.

If I had to put a number for growth in second quarter, it looks between zero and minus 5 %. It is hard to say exactly, because manufacturers are still pushing some stocks to dealerships.

Q: Your three wheeler sales are down 15-16 % month on month to 34,000, are there any problems?

A: I don’t know if that information is correct. We are at 34,000 versus 35,000 last March.

Q: I am talking month on month?

A: Yes, month on month this would happen every year. This is because in March both for motorcycles and three wheelers some of our exports that are technically not qualified, but the mates receipt on the ship would be then shown as exports in April. Every year one would see April exports to be unusually higher by about 20,000 unit, March would be usually lower by the same numbers.

There has been trouble throughout the year in some of the three wheeler markets. In the beginning of the year we lost out heavily in Sri Lanka and once again the clouds are there. Bangladesh has been a trouble for the last month or two with the result that it is again a big three wheeler markets that can potentially impact us. Egypt, third largest three wheeler market has great problems. There is trouble brewing in three wheeler markets but the number 35,000 is not due to that. It is explained only by the shift between March and April.

Q: Now, what is the Sri Lankan situation like? Did it affect March performance at all and do you see it spilling over to April now with the recent political developments?

A: No, till now that has not happened. Given the recent political developments in May and June, were there to be some back clash then it would have hurt our exports. As of now, our exports that have stabilised at round 8,000 three wheelers and 7,000 motorcyles to Sri Lanka each month as against 10,000 to 11,000 that we were doing for each before, it remains the same but we have to watch every month.

Q: We are now in the first week of April and you know the numbers for the entire last fiscal, can you talk about the number for the next fiscal or is the situation too fluid?

A: We can target double digit growth for the next fiscal and hold on to our profitability. We have been through a very difficult year on many counts, staying in the 20 % EBITDA area. We can maintain the 20 % EBITDA (earnings before interest, taxes, depreciation and amortization) while pushing for double digit growth and that suggests we should get closer to 5 million vehicles this year.

As the year begins, April will be better than January-February-March partly because of the festivals we spoke about and also because May is going to be a very big marriage season this year. We are looking at better April, good May. Overall, I would expect the industry to turn positive in Q1. Beyond Q1, it would be difficult to say anything specific about the year but I am hopeful that our plan will go through.

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