Focus on domestic motorcycles segment helps us outperform peers, says Rajiv Bajaj

Leading two- and three-wheeler manufacturer Bajaj Auto reported 1.96 percent rise in total sales at 4,23,315 units in April. The company had sold 4,15,168 units in the same month a year ago. The total commercial vehicle sales during the month under review declined 12.97 percent to 57,047 units as against 65,551 units sold in April 2018.

Bajaj Auto Managing Director Rajiv Bajaj says focus on the domestic motorcycle segment is helping the company outperform its peers.

I will not say there is incremental weakness, but I would say the weakness that we see post the festive season continues. You will hear from everyone progressively today how year-on-year there is degrowth and retails are under pressure. They are under pressure for example, even in states like Maharashtra which had the strong festive season of Gudi Padva. So despite the positive seasonal inputs, the market for some reason continues to be soft.

A: I would say in a word what is working for us is our showcase. Despite all that has been said about Bajaj Auto discounting, you will see that the same impact on margins is there as there is for all those who have announced the results so far.

So, what I want to say is we don’t discount. I have been at pain for the last 9 months trying to explain that just because we sell one stock keeping unit (SKU), that is 10 percent of your portfolio, at 10 percent discount doesn’t mean we are engaged in a price war or initiated a price war.

To come back to your question, what is helping us is our focus on the domestic motorcycles. Right now particularly in what we believe would happen in the market is polarisation. On one hand there are some people that are clearly down trading, going down to the more value for money – 100-110cc space, which is where we are doing so well. So, for example, our Platina brand has grown 77 percent YoY in April and that’s unheard of especially at these times. In the month of May we are looking at 100 percent growth for Platina for example.

On three wheelers, since we are a market leader there, a global leader there, and we continue to focus very strongly on all segments. So, that niche is continuing to do very well for us.

A: As I said, in the queue of perplexed people I am ahead of you because I said very candidly I have no idea why the overall industry is soft and I have absolutely no idea when growth will come back. I said this because people now attribute it in hindsight to factors in August and September such as insurance, fuel prices, and one other thing that happened that I cannot remember now.

However, the point was that while being fully aware of these factors, everybody went into the festive season saying it is going to be great, everybody ramped up production, stuffed the dealers to the gills, and then in January we started acknowledging that the market has been soft, people are carrying 100 days of inventory, etc. So the truth is that nobody knows why it is soft.

In my experience this is so not just for India, we have seen in so many export markets, it was very hard to explain why for example the market in Nigeria fell as it did about 18 months ago and that it batted us so seriously because we are a big player there.

I am not going to comment on what Hero MotoCorp has said, which means I disagree with the number they are putting out. However, I am not going to say any more than that.

I said the last time we spoke that our inventory level was 55 days and that we would like to gently push it back down to the normal level of 45 days and do that by both means. On one hand improve our retail sales and we have managed to do that. So for example, our domestic motorcycle retail growth is exactly 20 percent in April over last April at 2,16,000-2,17,000 motorcycles. So we are moving retail up every month. At the same time, as you may have noticed, our billing is 10,000 less than that. So, we have destocked the channel by 10,000 numbers. 10,000 is not a lot, but we really do not need to do much more than that because these are always at 55 days and this will slowly bring us back. By June or July we will be back to 45 days.

Not only that, sometimes the younger brother gets ahead of the older one. However, I do not know, he must have done something right, partly it is luck, whatever it is, but there is again one common factor is that of focus.

Bajaj Finance is an enormously focused company and I would say not just my father, from Pamnani, Sanjiv, Rajeev Jain, etc. there is an outstanding team there that is just doing one thing right day in and day out with the purpose of being world class and that is exactly what my father told me.

I would not know the numbers off the top of my head, but I would hazard a guess that about 70 percent plus motorcycles at least are financed and I would imagine that would be the same for scooters also. In fact this was the third reason I was not able to remember earlier, the liquidity issue, thanks to IL&FS, etc.

So, it is true that financing is very important for two-wheelers also. The vast majority are financed and those who do not have this lever under their control, those Original Equipment Manufacturer, have suffered more.

Don’t put me in a spot because I have an outstanding relationship not just with Siddhartha but with Vinod as well, but I will stick my neck out and say this and I am sure Siddhartha won’t take offence. He will agree with it that when you go through such a rough patch it is not for no reason. There has to be some strategic misalignment somewhere. I have my own view of what that might be but it would not be appropriate of me to say it now. I will tell Siddhartha when I see him because we are often in touch. However, I will say it again that he is outstanding, Vinod is super outstanding. They will be back, no doubt.

You are right, it was 22 percent in March, but I must point out that that was an exception. I think for the quarter as a whole, it was about 20 percent. In March it went up 22 because the others destock heavily, disproportionately for that month. I do not have the numbers of competition for the month of April but I would imagine we would be back around 20 percent. I expect us to remain in this zone for the next month or two but after that I am very hopeful that we will move towards our target and let me tell you what that is; last year which means in FY18, we exited from FY18 to FY19 at 15 percent share.

In May, we are looking at something closer to 430,000-440,000 which should be about 5-10 percent over last May; a little better than 2-3 percent growth we had in April. In June I would like to believe it is going be even better because our new products will start rolling out and I hope that we can start hitting 450,000 mark that we have been talking about for some time.