Bajaj expects higher margins from bike unit

Bajaj expects higher margins from bike unit
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First Published: Fri, Aug 10 2007. 09 43 AM IST
Updated: Fri, Aug 10 2007. 09 43 AM IST
By Reuters
Mumabi: Bajaj Auto Ltd, India’s No. 2 motorbike maker, expects a new bike will boost margins from its motorbike business, with new forays like commercial vehicles contributing to sales, a senior official said.
Bajaj will launch a new 125 cc bike in September aimed at weaning customers from its lower-margin 100 cc bikes, which compete in an extremely price-sensitive and crowded market dominated by leader Hero Honda Motors Ltd.
“Our targets for the new bike are pretty aggressive,” S. Sridhar, chief executive of two-wheelers, said late on 9 August.
“With this launch, we expect volumes to improve and margins to rise for bikes overall,” he said at the company’s headquarters in the western city of Pune, where a new engine was unveiled.
Bajaj will make 20,000 units of Exceed to start with, ramping up to 50,000 units during the festival season, and raising output further when the company starts making the bike at a newly opened plant in the northern Uttarakhand state in December or January.
Bajaj estimates more than a third of the motorbike market is for 125 cc and above, where margins are at 15-20%, compared to 100 cc, where there are no profits, Bajaj has said.
Bajaj has more than a third of India’s motorbike market -- the world’s biggest after China -- and sales of its motorbikes in the fiscal year that started in April are down 12% from the same period a year earlier.
But while other vehicle makers have blamed after demand on high interest rates, Bajaj believes it is mainly because of a lack of mew launches that consumers have postponed purchases.
Some analysts also agree, pointing to buoyant sales of cars on the back of new launches from leader Maruti Udyog Ltd and others.
“There have been no big bike launches as manufacturers have cut back, so this should create a buzz,” said Ajay Shethiya at Enam Securities, who has a “neutral” rating on Bajaj stock, his top pick over Hero Honda and TVS Motor Co.
While the two-wheeler market was likely to end the fiscal year to March with a sales decline of about 5%, Bajaj would record growth, Sridhar said, without specifying numbers.
Bajaj, which is in preliminary talks with French car maker Renault on making “very competitive” vehicles in India, made the transition from a maker of scooters and has vowed to overtake Hero Honda.
But it is more focused on increasing profitability of motorbikes and new ventures, including a four-wheel cargo carrier and, possibly cars. “Becoming No. 1 is a given, and we’re not too concerned about when that will happen,” Sridhar said. “The excitement will be in our new bike launches and new businesses,” he said.
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First Published: Fri, Aug 10 2007. 09 43 AM IST