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Flurry of lockdowns interrupted recovery in July 2nd half: Bajaj Auto
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SME Times News Bureau | 12 Aug, 2020
The flurry of lockdowns across the country in many major cities and
states interrupted the recovery in the second half of July, according to
Rakesh Sharma, Executive Director, Bajaj Auto. "As a result the outcome
in July was a bit lower than June retails," he added.
In an interview with IANS, Sharma said the demand for motorcycles saw smart recovery to previous year's levels by end June.
On
the target for sales, he said "At the start of the quarter, our plan
was to achieve cumulative sales of 1 million vehicles between domestic
and export, including motorcycles and 3 wheelers. So far, we have
achieved sales of just over 2,50,000 vehicles, including three-wheelers
in July. Hence, barring unforeseen issues caused by Covid, we should be
in line to achieve our Q2 objective of 1 million vehicles," Sharma
added.
Pent up demand is playing a major role in the recovery.
"Certainly there is a strong element of pent up demand as there was a
blank out of retails for almost 60 days. This has been a major factor in
driving the rapid recovery to normalcy witnessed in June and early
July," he said.
He added that the experience of June and July
suggests that demand can stage a recovery quite rapidly and is strongly
as well as singularly dependent on the progression of COVID and the
administration's response to it. "Hence it is difficult to make
forecasts. Our approach is to manage our business in shorter time
horizons and recover faster than the industry," Sharma said.
The
three-wheeler segment is yet to pick up across domestic markets, he
said. "With people working from home or avoiding the public transport,
the demand for three wheeler transportation has taken a hit. This has
severely impaired the earning power of 3 wheeler drivers and owners
which weakens their ability to take loans or service them. Hence the
recovery in 3 wheelers is very poor at only 40% levels," he said.
Sharma
said there is no evidence of downtrading. Bajaj Auto offers a range of
motorcycles, starting from the affordable CT 100 and Platina to the KTM
390 series, priced above Rs 3 lakh. "We have not seen preference
shifting towards CT100 kick-start, which is the most affordable
motorcycle in the industry. On the contrary our new introduction � the
Pulsar 125 has outperformed all brands despite being the most expensive
125 cc motorcycle in the market," he added.
Here are the excerpts...
Q: How do you assess the month of July for Bajaj Auto and the two-wheeler industry?
A:
The demand for motorcycles had started to show a smart recovery to
previous year levels by end of June and this trend had continued in
July. However, the flurry of lockdowns across the country in many major
cities and states interrupted the recovery in the second half of July.
As a result the outcome in July was a bit lower than June retails. Bajaj
Auto's performance was in line with the industry performance except for
the mid 125 cc segment where we recorded handsome retails ahead of the
industry and market share gains.
Q: How much capacity is Bajaj Auto operating at and what are the targets for the coming months?
A:
At the start of the quarter, our plan was to achieve cumulative sales
of 1 million vehicles between domestic and export, including motorcycles
and 3W. So far, we have achieved sales of just over 2,50,000 vehicles,
including 3W in July. Hence, barring unforeseen issues caused by COVID,
we should be in line to achieve our Q2 objective of 1 MN vehicles. This
volume is well within our manufacturing capacity.
Q: There is
some evidence on the ground that the demand being seen is pent up demand
of the last two or three months when the country was under lockdown.
What is your view?
A: Certainly there is a strong element of pent
up demand as there was a blank out of retails for almost 60 days. It is
correct to assume that the decision making process of many customers
was interrupted and with the roll back of the lockdowns , these
customers are returning to the dealerships. This has been a major factor
in driving the rapid recovery to normalcy witnessed in June and early
July.
Q: What are the growth estimates for the company and industry for the coming months?
A:
The experience of June and July suggests that demand can stage a
recovery quite rapidly and is strongly as well as singularly dependent
on the progression of Covid and the administration's response to it.
Hence it is difficult to make forecasts. Our approach is to manage our
business in shorter time horizons and recover faster than the industry.
Q: How is Bajaj Auto adopting safety measures for the plants and retail dealerships?
A:
We have undertaken abundant measures for safe operations of our
facilities and to ensure that our employees also feel reassured about
their well being. The measures include new work protocols, adequate
social distancing, screening and monitoring, regular sanitisation,
installation of safety features, training and communication. In doing
this we have ensured compliance to Government standards. We have defined
these protocols for our dealerships too and provided them with training
and monitoring support under the Bajaj SECURE programme. The objective
is also to ensure that the customers feel safe about visiting our
dealerships.
Q: What is the outlook for three wheelers in the domestic market?
A:
The three-wheeler segment is yet to pick up across domestic markets.
With people working from home or avoiding the public transport, the
demand for three wheeler transportation has taken a hit. This has
severely impaired the earning power of 3 wheeler drivers and owners
which weakens their ability to take loans or service them. Hence the
recovery in 3 wheelers is very poor at only 40% levels. For the outlook
to improve, there needs to be more passenger traffic and the finance
companies need to recalibrate their risk and return assessment of the
sector.
Q: How are the export markets performing for Bajaj Auto?
A:
We are currently present in more than 70 countries, but we extensively
study the pattern of demand and performance in around 50 countries. We
see a mixed reaction on demand in these countries as compared to India.
We believe that on an average the demand has reached 80% to 85% of the
normal level. Our retail has reached 88% to 85% this July as compared to
same period last year. In the case of exports, the inventory pipeline
is generally higher due to transit inventory and that creates about a
month's lag between retail improvement and shipment improvement. We are
hoping that its positive impact will be sensed from September at our
end.
Q: What are the changing consumer trends being seen in these Covid times?
A:
On the basis of June and July retails we have not observed any
fundamental shifts in consumer preference and therefore in the market
structure. Certainly in times of uncertainty the consumer does become
more conscious of value and examines the proposition more robustly.
However, if a proposition delivers substantive value, they are not
shying away from paying more. It is being reflected in the market
structure -- in terms of the relative shares of each of the different
segments of bikes -- which has remained intact and there is no evidence
of downtrading. Bajaj Auto offers a range of motorcycles, starting from
the affordable CT 100 and Platina to the KTM 390 series, priced above Rs
3 lakh. We have not seen preference shifting towards CT100 kick-start,
which is the most affordable motorcycle in the industry.
On the
contrary our new introduction � the Pulsar 125 has outperformed all
brands despite being the most expensive 125 cc motorcycle in the market.
Q: The rural markets seem to be outpacing the demand in the cities?
A:
The rural markets were faster to recover but most urban and semi urban
locations have also recovered apart from the very big cities like Delhi
and Mumbai. Apart from these recovery has been quite secular and evenly
spread.
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