Bajaj Auto says sluggish demand put festive cheer in slow lane; price hike fell short of Q2 inflation

Rakesh Sharma, executive director of Bajaj Auto, on Thursday, said that demand is very sluggish in rural areas and metros. Sharma also said that Bajaj Chetak continues to enjoy a strong response.

Two-wheeler automobile manufacturer Bajaj Auto on Wednesday posted a 12 percent increase in its net profit to Rs 1,274.5 crore for the second quarter ended September 30, 2021.

In the corresponding quarter last year, the company posted a net profit of Rs 1,138.2 crore. Its revenue from operations during July-September jumped 22.4 percent to Rs 8,762.2 crore, compared with Rs 7,155.9 crore in the year-ago period.

“Demand is very sluggish in the rural areas and in the metros. It’s the middle that is holding up the demand. We are seeing that cash sales are negative and finance sales are growing. The other indicator we are looking at is the festive demand, and it’s been a lukewarm festive season so far, but all indicators are suggesting that at best it will be like-for-like festive season this year,” Sharma said, in an interview to CNBC-TV18.

Chetak continues to enjoy a very good response, but it's also gotten swept up in an envelope by this whole chip shortage imbroglio and Bajaj is not able to service all the orders that it’s picking up, he said.

Sharma further mentioned that price increase is not sufficient to recover inflation faced in this quarter. “We have taken price increases in Q2 and even as late as October 1st, but these have not been sufficient to recover the inflation which we have faced within the quarter. Our preference would be to go for the price increase but we got to roll all factors in to take a decision on price increases,” he said.

According to him, chip shortage only affects the premium end of the portfolio. “In our case, the chip shortage affects only the premium end, which is about 20 percent of our portfolio and about 50-60 percent has been the impairment, so 10 percent of the overall motorcycle production witnessed a shortfall,” said Sharma.

He further said that this kind of uncertainty (the semiconductor shortage issue) will continue, probably, for the next 3-4 quarters.

For the entire management interview, watch the video