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Bajaj expects auto business to grow on fresh demand

Bajaj expects auto business to grow on fresh demand
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First Published: Thu, Apr 23 2009. 10 35 PM IST
Updated: Thu, Apr 23 2009. 10 35 PM IST
Mumbai: India’s largest three-wheeler maker, Bajaj Auto Ltd, which lost market share in the last fiscal, hopes to recoup ground on the back of replacement sales and city authorities allowing fresh and renewed permits.
Bajaj Auto expects to grow 15% in this segment by selling an additional 40,000 autorickshaws in the current financial year on fresh demand from metros and new product launches, said C.K. Rao, general manager, three-wheeler business.
Bajaj Auto’s market share by volumes fell to 46.66% in the fiscal to 31 March from 54.26% in the previous year.
Mahindra and Mahindra Ltd, the third largest seller of autorickshaws, grabbed 10.12% share, up from 1.8% the preceding year, as it launched a slew of new models and marketed aggressively in semi-urban and rural areas. Piaggio Vehicles Pvt. Ltd managed to retain its share of about 38%.
Three-wheeler owners require permission from regional transport offices to ferry passengers and the number of permits issued in the metros depends on city administrations.
In recent years, state governments have capped the number of autorickshaws allowed in cites. As a result, sales have been largely driven by replacement demand.
In July last year, the Calcutta high court ruled that all the autorickshaws running on two-stroke engines have to convert either to compressed natural gas (CNG) or liquefied petroleum gas (LPG) engines by 31 December, a deadline it later extended to 31 July.
The ruling will have an impact on an estimated 80,000 autorickshaws that ply in the Kolkata metropolitan area, which also includes parts of north and south 24-Parganas, Howrah and Hooghly districts.
Tamil Nadu, which has 152,706 autorickshaws, lifted a ban on issuing permits for Chennai beginning this year. “We are issuing 10,000 new permits for the autorickshaws,” said a joint commissioner at the transport department in Chennai.
He declined to be named. Bajaj Auto’s Rao said it has already got orders for 2,800 units from the city.
Meanwhile, Mumbai which also stopped issuing fresh permits after a ban, is renewing the unutilized permits that have lapsed after a March directive by the Maharashtra government.
This augurs well for manufacturers such as Bajaj which will see demand for new autos from those who get their permits renewed.
In Delhi, Rao said his company expects to sell more in the current year with many owners scrapping old vehicles. “We have replaced 17,000 autos in two years,” he said. “It’s (however) not possible to project numbers for this year as one can’t say how many would be replaced.”
Bajaj Auto is likely to be the main beneficiary of this new demand. Ravi Chopra, managing director, Piaggio Vehicles, said to be able to ride on the new orders, his company, which mostly has diesel variants in its portfolio, needs to launch CNG and LPG models. “They will be ready for launch in the next two-three months,” Chopra said.
In a Citi Investment Research report released on 15 April, analysts Jamshed Dadabhoy and Hitesh Goel said they expect Bajaj Auto’s passenger three-wheeler segment to grow in fiscal 2010 due to growth in rural and semi-urban areas. However, Tata Motors Ltd’s Nano small car could pose a threat to the segment in the next financial year, they said.
Three-wheeler makers disagree. “Nano will not have an impact as the cost per km is still higher. Wait for the market to catch on,” said R.C. Maheshwari, chief executive of Bajaj Auto’s commercial vehicle business.
In the fiscal year to 31 March, 268,489 passenger three-wheelers were sold in India, 14.3% more than in the previous financial year.
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First Published: Thu, Apr 23 2009. 10 35 PM IST