HomeBUSINESSBajaj Auto expects domestic motorcycle biz to improve, but exports to take...

Bajaj Auto expects domestic motorcycle biz to improve, but exports to take a hit in Q2


NEW DELHI : Pune-based two-wheeler maker Bajaj Auto expects its performance in the domestic motorcycle market to improve with improving supply of semi-conductor chips in the second quarter of the ongoing fiscal, a top company official said. On the other hand, the company, which exports half of what it produces to the global markets, will see international shipments slow down in the quarter as fears of a global recession plays spoilsport and several global economies stare at a slowdown.

Bajaj Auto, one of the world’s largest motorcycle manufacturers, has seen its share in the domestic market drop significantly over the past couple of years on the back of an acute semi-conductor shortage. In the June quarter, the two-wheeler maker had lost close to 380 basis points in the domestic market, which it now hopes to be able to recoup in the ongoing quarter.

“Our production plans were impaired were about 25% and in the domestic motorcycle business, our manufacturing was impaired by almost 40%. This was also the case in three-wheelers. This led to a severe run down of our channel stocks. Our stock levels in the motorcycle business are close to two-three weeks level and in the three-wheeler business, they are almost only at a week’s level”, Rakesh Sharma, Executive Director, Bajaj Auto said while announcing the company’s first-quarter results on Tuesday.

“The motorcycle distribution is a two-tiered business (the company ships out vehicles to major dealers, which then further supply to tertiary dealerships in smaller towns and cities) and to fully service the market all across the country we require a channel stock of at least six weeks. So we are less than half of the levels at where we should be, which has led to a retail level loss”, he added.

Sharma observed that the chip supply situation is “dramatically improving” with the worst of the shortage behind the company. “We will be looking at replenishing our stock levels as rapidly as possibly and by the end of the September quarter, we should be able to at least get back the market share we had exited Q4FY22 at, and build up on that as the festive season approaches”, Sharma said.

However, Bajaj Auto’s high exposure to export markets at 62.2% in Q1FY23 (compared with 60.2% in the previous quarter, according to brokerage firm Prabhudas Liladher leaves it vulnerable to the global storm of recession and high inflation and interest rates, leading to a slowdown in demand.

“Because we are in the midst of this storm, there would certainly be some adverse impact in (international) shipments in the second quarter. But natural demand will come up in the third and fourth quarters and we should start to see better numbers, unless there is a  major breakdown in the wolrd economic order”, Sharma told reporters in a conference call.

Talks of a potential blanket ban on two-wheelers in Nigeria could also dampen Bajaj Auto’s sales in the short term as sentiment in the African nation takes a hit, although there is no formal notification announcing a ban yet. Nigeria contributes close to 25% of Bajaj Auto’s exports.

The two-wheeler market, which is dominated by the entry-level segment with significant demand typically arising from rural and semi-urban regions, has been seeing a persistent slowdown for the last few quarters. While the steep double-digit decline the market had been witnessing was arrested in the June quarter, Sharma feels the two-wheeler market continues to be in the territory of negative 3%-5% growth this quarter (accounting for the low base effect of Q1 last year).

“We saw urban demand come back faster than rural demand in Q1. Rural demand could start returning August onwards”, Sharma concluded.

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