Mumbai: India’s motorcycle market is set to witness a new round of competitive intensity as Bajaj Auto Ltd prepares to grow its share in the market for entry-level and premium motorcycles, according to analysts. Bajaj’s push for market share growth is already consuming its profit margins but the Pune-based company is undaunted and has set greater ambitions with aggressive product pricing, the analysts told Mint.
Competition is expected to heighten in the coming months with the onset of the festive season from August, when demand for consumer goods traditionally peaks. This year, demand is particulary expected to grow in rural areas where consumer sentiment is on an upswing.
In addition to the entry-level segment, comprising motorcycles up to 100cc engine capacity, Bajaj aims to also grow its share in the 110-125cc category, Kevin D’sa, Bajaj’s president, finance, said on an analyst call.
The maker of Pulsar and Discover motorcycles aims to achieve a 20% domestic market share this fiscal year, he said, and sees 25% as the long-term goal.
“We want to expand the bottom of the pyramid and take the entry-level (segment) share to 45% to 50% from 33% at present," he said, adding that new 110-125cc motorcycles are expected to be introduced in last quarter of this fiscal.
During the three months through June, Bajaj’s market share expanded to 16.27% from 13.96% a year ago, according to the Society of Indian Automobile Manufacturers (Siam).
The changing scenario in both segments doesn’t bode well for others such as Hero MotoCorp Ltd, Honda Motorcycle and Scooter India Pvt. Ltd and TVS Motor Co. Ltd who marginally ceded market share to Bajaj last quarter.
“Further gains in market share for Bajaj Auto will, of course, come at the expense of competition as the price cuts on the CT (motorcycle), which make it the cheapest two-wheeler in India, expand the addressable market in a material manner," said an analyst who declined to be named.
Bajaj Auto disappointed investors on 20 July with lower-than-expected June quarter earnings, and is expected to witness a downtrend in profit margins for the next six to eight quarters even if there are no further price cuts as material cost pressures continue, according to analysts.
D’sa said margins would not touch the historic 20% levels for the next two to three years.