By Tamanna Inamdar
Retail gross sales have continued to endure. Those that insist that there’s development, allow them to put out their retail information year-on-year and the details will converse for themselves, says Rajiv Bajaj, MD, Bajaj Auto.
You’re planning to spend money on a brand new plant at Chakan. A whole lot of gamers in your house are recalibrating their capex. They’re questioning whether or not they wish to make investments extra. Ought to we take a look at this as an indication of optimism that issues are going to get higher?
I’d say this can be a signal that our technique is working and we’re sticking with it as a result of the take a look at of a very good technique is that it holds you in good stead in tough instances and as you recognize our technique fairly merely has been to be a world motorbike producer and even over these final 9 or ten months of this disruption, now we have accomplished comparatively higher and proceed to do comparatively higher as a result of we’re not depending on anyone market or anyone phase.
Now coming to the brand new plant in Chakan, we proceed to imagine that the type of development now we have seen with KTM within the final 10 years will proceed strongly into the longer term. Once we first partnered KTM in 2007, it was making 65,000 bikes. Now they’re near manufacturing 300,000 bikes and over 100,000 of these had been designed, developed and made on the first plant that now we have at Chakan. It’s our conviction that this sort of development will proceed with the manufacturers KTM and Husqvarna into the longer term. I really feel assured KTM will double volumes from right here.
As you’re maybe conscious, we now have a brand new associate in Triumph and we wish to commercialise these merchandise that we’re creating collectively someday in 2022-2023. Subsequently the primary focus of the brand new plant shall be KTM, Husqvarna and Triumph bikes for which the world is our market and due to this fact we’re making this funding.
Are you able to share something extra about this collaboration with Triumph? You mentioned there shall be a rollout in 2022-2023. What’s the technique there? What sort of autos will we see?
It’s no secret that many producers together with BMW, Triumph, Harley-Davidson have been very impressed by the success of the Bajaj-KTM relationship. I do know as a result of they’ve all mentioned as a lot to me and I believe the easy approach to describe the Triumph relationship can be that in its content material and its intent, it is rather much like our partnership with KTM. In different phrases, we’ll develop new merchandise collectively and so a lot of the improvement shall be accomplished right here at our headquarters, at our R&D and engineering amenities in Pune.
These merchandise shall be manufactured by us and 98-99% of the content material is normally home. It’s so with KTM and I count on that to be the case with Triumph as properly and when it comes to advertising and gross sales, Bajaj could have accountability not only for the Indian market however for a number of the export markets as properly together with our neighbours within the subcontinent and a few markets in Asia, Africa, and so forth. That is what we do for KTM as properly as a result of on the finish of the day, we wish to be a part of the entire relationship. We don’t wish to simply make any individual’s print after which ship it to them. We aren’t in that enterprise. Will probably be a really healthful relationship.
Proper now, now we have a number of merchandise underneath improvement. Triumph merchandise underneath improvement shall be within the mid house identical to the KTM bikes that we make and the Husqvarna ones as properly. Someday in 2022, after we had initially hoped to begin up however clearly there have been a number of months of delay due to the Covid state of affairs. Whether or not we’ll nonetheless handle it in 2022 or will probably be extra like 2023, we’ll know in a bit.
How does the brand new mutant Covid wave influence exports for KTM? Is there any disruption to your plan?
When the Covid pandemic began, there was a transparent shift to private mobility within the developed markets. I’ve by no means subscribed to the view that that is prone to be a major phenomenon in India as a result of in India, whoever wants a two wheeler and may afford it, already has one. However within the developed markets of the US, Europe, Australia and so forth, most individuals use automobiles or public transport.
The 2-wheeler market could be very small. So, if a bit of individuals all of the sudden really feel that it’s safer to have their very own two-wheelers, they will actually afford to take action and use that as an alternative of public transport. That’s why KTM has witnessed a really sturdy development this yr regardless of the disruption in March, April, Could the place all of us had totally different shades of lockdown.
KTM expects to complete this monetary yr on par with final yr. I’ve heard of year-on-year development charges of their markets being wherever between 30% and 100%. Admittedly in quantity phrases, that isn’t big however as you possibly can think about, these are very very worthwhile bikes and this sort of development will not be for the massive bikes as a result of the people who find themselves shifting from public transport to a KTM motorbike are shifting for the smaller ones within the 125-400 cc vary.
We’ve got really witnessed a really sturdy development in our KTM exports and due to this fact from a requirement perspective, this has been a very good factor for certain because the provide chain was terribly disrupted each at KTM finish and positively over right here as a result of the type of lockdown that he affected right here and that drawback has not fully gone away.
We’re nonetheless struggling and we all know that lately there have been points with provide of parts, particularly out of China. There was a scarcity of semiconductors, ECUs and points with the supply of containers for exports. The provision chain continues to be to stabilise. So far as this second, third wave of Covid is worried, frankly I have no idea what it means to me. A virus is a virus if you happen to suppress it by way of some means it might appear to be the instances are dropping, the an infection is dropping. The minute you launch folks and permit them to hold on with life as ordinary, it’s going to come again. Basically, there’s a flu on the market and it’s going to be there for someday however what can we do? We’ve got to deal with it the perfect we are able to.
What’s your tackle the influence of manufacturing linked incentive (PLI) schemes on the outlook for 2021?
Bajaj Auto was an enormous beneficiary of the MEIS export incentive as a result of we export about half of what we make. So a 2% incentive on exports to us was a 1% successfully throughout your complete manufacturing of the corporate. Now this was all of the sudden and with none discover or rationalization, withdrawn from this monetary yr and that was an enormous hit to an organization like Bajaj. There was an influence of Rs 250-300 crore a yr on our enterprise.
We had been advised that this incentive wouldn’t be out there for this yr so we needed to reverse that out of our first quarter outcomes. Of late, one has heard that the federal government may very well have the ability to pay this incentive however there is no such thing as a readability whether or not they really will and even when they’ll, when will it occur.
So far as these PLI/ RoDTEP schemes are involved, we perceive the intent is to reward those that are exporting though it’s a manufacturing linked incentive however then the premise is the space travelled by the products. Once more as exporters, we’re very keen about this improvement however since there are not any particulars out there, it’s not possible for me to say what precisely the scheme is about and what would be the influence on Bajaj.
Have you ever given any inputs on what you want to see as incentives?
Actually not simply Bajaj, as SIAM, now we have given our inputs. I’m not conscious of the main points however primarily on the very least, we must always discover restoration of the MEIS stage of incentive. That must be the ground. Something extra that the federal government can do is at all times welcome. For instance, I’ve heard a number of instances that the target of the federal government is to create international champions out of India and for this goal, they want to focus these advantages on sure sectors and sure corporations who they imagine stand a very good probability of turning into international giants or international champions.
I can not however agree with this goal as a result of there is no such thing as a level in a authorities fragmenting its assets over 1000’s of organisations. I fully agree with this focus. I want to imagine that the auto trade is vital sufficient to be thought of for this incentive and inside which, given Bajaj’s observe file for the final 15 years of exports must be thought of. We now export virtually half of what we make which is over two million autos a yr. I want to imagine that Bajaj shall be a kind of corporations that the federal government will imagine is or is usually a international champion.
Web-net, how would you take a look at 2020 when it comes to gross sales, when it comes to demand, when it comes to restoration for your enterprise and for two-wheelers particularly?
I’ll keep that my view stays the identical because it was in September and October and there was completely no contradiction in what I mentioned. Once I mentioned that gross sales are detrimental year-on-year, notably so for the entry stage phase or the 100cc motorbike, I used to be talking within the context of retail gross sales and if producers would transparently share their retail information on time as FADA has been asking them to, then the details would converse for themselves.
Sadly, for causes I don’t perceive, producers resist sharing this information and proceed to desire to place out their wholesale information. Now wholesale being greater year-on-year in September and October isn’t a surprise in any respect as a result of we all know that this yr the festive season got here in a number of weeks earlier than final yr so clearly September and October this yr had been going to look good in comparison with final yr and that’s precisely what occurred for everybody, together with for Bajaj.
Once we did a excessive in October it was primarily based on wholesales and we mentioned that. The state of affairs put up the festive season once more continues to be the identical. By that I imply the retail state of affairs as a result of that’s what issues on the finish of the day and retail is detrimental year-on-year at the least for Bajaj Auto. I can not converse for others as a result of I wouldn’t have entry to that information and once more, I’m speaking within the context of bikes, notably entry stage bikes.
After all, Bajaj’s sports activities bikes are witnessing development as a result of that’s an space of our energy and now we have development there notably on the Pulsar model now we have a really good-looking development. We’ve got development in our exports. That’s doing properly for us however positively on the entry facet, there’s degrowth and I’d be simply shocked if this de-growth is solely for Bajaj.. I’d not know tips on how to interpret or clarify that.
To me, this de-growth on the entry stage is logical as a result of it’s that buyer who was laid off, it’s that buyer whose wages had been minimize, it’s that buyer who walked residence within the type of a migrant. I don’t see why persons are shocked by this.
So are you able to quantify the de-growth in entry stage for Bajaj Auto yr on yr?
I wouldn’t have the quantity on the again of my head however I did say in October that it appears to be like like minus 20% and it will be someplace round there. Now, a part of this degrowth is a aware doing on our half as a result of we focussed extra strongly on profitability which I imagine is the precise factor to do particularly in instances like this. What has occurred is that whereas our market share at round 19 plus/minus 1% in home bikes has remained unchanged yr on yr, the profitability of our home motorbike enterprise when it comes to the EBITDA margin has virtually doubled yr on yr.
Should you take a look at it from a quantity and share perspective, chances are you’ll discover that we’re the place we had been final yr. However if you happen to take a look at it from the perspective of profitability, now we have moved manner forward. Now inside a stagnant quantity, we assist motorbike manufacturers like Pulsar, Avenger, Dominar, KTM and Husqvarna have grown very properly whereas the commuter finish of it — CT and Platina == manufacturers have de-grown. A part of this degrowth, which could be 20% or 15% now, can be unique to Bajaj Auto, however I’d suspect there’s at the least 10% de-growth within the trade so far as entry stage manufacturers are involved. I’d be very shocked if that isn’t the case for the opposite gamers.
What’s your response once you get trolled quite a bit for saying we’re seeing degrowth when all your friends are saying that the restoration has been good and glorious. Your critics say that you’re being “detrimental” even whereas your numbers are wanting superb.
To begin with. I’m blissfully unaware of something that’s being mentioned on social media as a result of I’m not on any social media. I’m not on Fb or Twitter or Instagram or what have you ever. I have no idea what’s being mentioned there. However so far as this matter is worried, one has to only merely go by the details.
If you’ll scale back the dialogue to wholesale in September and October, that could be a very myopic dialogue. We are able to talk about this on a panel with retail information for the final 12 months, for the final 24 months and we are able to see how the trade was already in de-growth final yr due to the three inimical elements of insurance coverage, ABS regulation and BS-VI which mixed to boost costs by between 30% and 40%. Now once I title these three elements, once I title their influence in rupees, no one can deny this as a result of it’s a reality.
As soon as once more, this yr ranging from March now we have been hit by three extra inimical elements – first the lockdown, then the withdrawal of the MEIS Scheme after which the disruption in imports notably from China. On this state of affairs, retail gross sales have continued to endure and I have no idea who they’re, however these friends who insist that there’s development, allow them to put out their retail information yr on yr and the details will converse for themselves.
