Bajaj Auto plans four new passenger and cargo vehicles

Bajaj Auto plans four new passenger and cargo vehicles
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First Published: Wed, Sep 10 2008. 11 14 PM IST

Updated: Wed, Sep 10 2008. 11 14 PM IST
Mumbai: The country’s biggest manufacturer of three-wheelers by market share, Bajaj Auto Ltd, will ignore shrinking numbers in the passenger and cargo segments to launch four new vehicles after September, as it bids to sharpen its competitive edge.
Two of these will be goods carriers and the other two passenger vehicles, said R.C. Maheshwari, chief executive of the company’s commercial vehicle business.
He declined to say if these would include four-wheelers.
The new launches, he said, are part of the company’s strategy to keep competing in the so-called last mile transport segment, which comprises smaller vehicles such as autorickshaws and mini trucks that are used for transporting people and goods to their final destination.
Bajaj Auto, also the second-largest maker of two-wheelers in the country, proposes to start making cars and mini-trucks, though sales of passenger and cargo vehicles have declined in the past few months because of rising competition, tighter regulations and a slowing market.
In August, sales of three wheelers fell 5% to 24,325 vehicles from 25,504 a year ago.
Maheshwari attributed the decline in passenger autorickshaw sales to the limited issue of permits, and in cargo to changing market dynamics and a shift to sub-1-tonne four-wheelers such as Tata Motors Ltd’s Ace mini-truck, the largest-selling vehicle in the segment in India.
Several state governments have put a cap on the number of fresh permits for autorickshaws because of congestion and pollution concerns.
“The three-wheeled cargo segment declined by 28%. Though we did anticipate a decrease, a decline as high as this was not expected,” said Maheshwari. “(But) you just can’t push three wheelers away from the scene.”
Three-wheelers, he expects, will regain their position in the market because of the rising prices for cars and mini-trucks, as well as higher interest rates, operational costs and fuel charges.
With increasing congestion, the need for lighter vehicles that can easily transport people and goods will only grow, Maheshwari added.
“As long as three-wheelers can meet the emission norms and offer fuel-efficient transport solutions, they will continue to exist owing to the high manoeuvrability and low operating cost offered by them,” said Ambareesh Baliga, vice president at Karvy Stock Broking Ltd.
“There is no reason for them (Bajaj Auto) to quit the three-wheeler segment as long as there is no legislation that restricts their movement and the margins are healthy.”
Bajaj Auto’s commercial vehicle business, which mainly comprises its three-wheelers, accounted for 12%, or 290,000 units, of the total 2.4 million vehicles sold by the company in 2007-08.
The three wheeler business accounts for 35% of the company’s Ebitda, or earnings before interest, taxes, depreciation and amortization, according to a report by Macquarie Research Equities.
Maheshwari refused to comment on the impact of the proposed new three-wheelers on the company’s commercial vehicle business, but analysts see any contribution coming only in the next financial year.
“I don’t see the new launches having a significant impact on the overall volumes unless interest rates cool off and other factors stabilize,” said Vaishali Jajoo, an analyst at Angel Broking Pvt. Ltd.
Bajaj Auto’s proposed mini truck, which will compete with the Tata Ace, Piaggio Vehicles Pvt. Ltd’s Ape Truk, and Force Motors Ltd’s M4, could help make up for the decline in three-wheeler sales.
“If you look at the sub-1-tonne segment, I think the only product that would give them real competition is Ace and not Ape Truk or M4,” said Mahantesh Sabarad, an auto analyst at Centrum Broking Pvt. Ltd.
Both the Ape and the M4 have mounted engines used in three wheelers and have not been able to dent Ace’s market share, said Sabarad. Bajaj, which plans to use better engine technology from Australia’s Orbital Corp. Ltd, will have the edge over competitors in the four-wheeled cargo segment, he added.
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First Published: Wed, Sep 10 2008. 11 14 PM IST