Two-wheeler industry showing 10% decline, mostly at entry level

We had made a bit of optimistic assumption of this year matching last year. I would say it has turned out to be slightly less than what we would have liked it to be, says Rakesh Sharma, CMD, Bajaj Auto.

How do you read the festive cheer and the numbers which are now coming out?
I would prefer to look at retails rather than billing because we sell to the dealers and there is an element of stock. Retails is what the dealer sells to the customer. Secondly, I would like to set the aperture of comparison not just at the narrow window of 32-days of festivity but a little bit pre-festive and post festive demand also.

We have a good sense of the numbers for the October 1- November 30 period. If we look at the industry’s retail numbers compared to that last year, then I suspect the motorcycle industry in India is in a decline of about 10% or so, give or take 1% or 2% here or there. I would say that going into the October-November period, we had made resumptions on the back of the rapid recovery in August and September. We had made a bit of optimistic assumption of this year matching last year. I would say it has turned out to be slightly less than what we would have liked it to be at minus 10% or so.

The only thing I would add is that we have aimed at the top half of the pyramid which is 125 cc and above and they have performed much better. So, there is a story even within that. Right at the top of the pyramids are bikes costing more than Rs 2 lakh – the KTM brand, the Dominar Brand which we sell. We have experienced double digit growth but as you move down the pyramid and ride to the entry level, it goes into a decline. Overall, the industry is in a decline of about 10% in this period.

READ  Double trouble at the top of Standard Life: Pension giant hit by savings exodus after mega-merger 

What is our current inventory level at the dealerships at this point of time?
This is not an easy choice to make for the companies or the dealers. We are recovering from the Covid period. There is an expectation that the mood will be buoyant and everyone prepares for an optimistic scenario. I would support that. It is natural for some kind of stocking rather over stocking to occur which is then corrected.

The industry will have to correct a little bit more than what we had expected to correct and the process will start with the December-January thing. In our case, given the deep distribution, we like to keep a 35-days inventory at the entire network. We are at about 41-42 days inventory and we would be taking some corrective action to pare it down to the normal of 35 days.

In December, the production numbers will be lesser. Can the wholesale units also be adjusted according to the retail sales?
Of course yes. The retail numbers will be less because it is the last month of the calendar year and we will be adjusting for the model changes as well as for reduction in the inventory. In our company, we are constantly conscious of the inventory build-up and we do not destock rapidly also because there is one other aspect which we always have to keep in mind and that is our interface with the vendors.

There is a lot of medium and small enterprises, large vendors — a big ecosystem out there and it is important to have a gentle down slope over there.

READ  Fed holds main rate steady, reiterates patience on future path

How are the exports markets doing? Has the second wave of lockdown impacted our exports? Are those markets impacted given that Austria is one of our biggest markets for KTM?
For Bajaj Auto, in the overall scheme of things, Austria is an important market. We are doing upwards of 200,000 units three-wheelers and two-wheelers put together. The KTM branded ones are at about 5,000, 6,000, 7,000 but these are higher value and higher profitability products. There has been a good recovery in almost all our overseas markets.



Please enter your comment!
Please enter your name here