HomeBUSINESSTwo-wheeler sales are picking up: Bajaj Auto

Two-wheeler sales are picking up: Bajaj Auto

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NEW DELHI : Bajaj Auto expects domestic motorcycle sales to pick up as the supply of semiconductor chips improves in the second quarter of this financial year, said Rakesh Sharma, executive director, Bajaj Auto.

However, the Pune-based two-wheeler manufacturer expects exports to decline with fears of a global recession playing out as several economies stare at a slowdown. Exports account for over 60% of the company’s annual revenues.

“Our production plans were impaired by about 25% in the domestic motorcycle market and manufacturing by nearly 40%. It was also the case in three-wheelers. This led to a severe run down of channel stocks. Our stock levels for motorcycles are about two-three weeks and only about one week for three-wheelers,” Sharma said during the first-quarter results announcement on Tuesday.

“Motorcycle distribution is a two-tiered business (Bajaj Auto ships to its large dealers, who then supply to smaller dealers in tier I and II towns and cities), and to fully service the market across the country. We require channel stock of at least six weeks. Now, we are less than half of the levels we should be at, which has led to a retail level loss,” Sharma added.

The chip supply situation is dramatically improving, and the worst of the shortage is behind the company, he added. “We will be looking at replenishing our stock levels as rapidly as possible, and by the end of September quarter, we should be able to get back the market share we lost in Q4 FY22 and build upon it further as the festive season approaches.”

However, Bajaj Auto’s high exposure to export markets, at 62.2% in Q1FY23, up from 60.2% in the March quarter), according to brokerage firm Prabhudas Liladher, leaves it vulnerable to external uncertainties, such as a global recession, inflation and high interest rates, leading to demand slowdown.

“Because we are in the midst of this storm, there will 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 seeing better numbers unless there is a major breakdown in the world economic order,” Sharma said during the 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 sentiments in the African nation takes a hit.

However, so far, no formal notification has been issued. Nigeria accounts for close to 25% of the company’s outbound shipments.

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