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| Edited By: Neha Rishi |Source: DNA |Updated: Mar 17, 2018, 02:35 AM IST
Bajaj Auto, which saw a 27% year on year growth in exports in the third quarter, plans to tap the Chinese and Brazilian markets in 2-3 years. It may also consider setting up an assembly line there to avoid the duty barrier.
Kevin D’sa, vice-president (finance), Bajaj Auto, said, “We have looked to consolidate our position in one market before seeking a
new one. When we touched a 35% market share in Sri Lanka and Bangladesh, we sought the African market. For now the African market is yielding good numbers, with close to 35,000 units sold monthly, but when it reaches a saturation point, we will consider China and Brazil. Our export story will remain robust this way. In the next 6 months to one year we will sell around 10,000 motorcycles in Nigeria alone.”
Rakesh Sharma, chief executive officer (international business), said the Brazilian market is large and attractive, but has many entry barriers in terms of competition. “The Japanese, especially Honda, are very strong there. They have a strong dealership network, after sales service and high localisation. We need to tackle these barriers, but we think that we have a right product mix to cater to that market.”
D’sa said it will be easier to enter the Chinese market as the vendor base is in place — only the engine will have to be taken there for local assembly. Bajaj has outsourced some of its operations to China, where the kitting of the bikes is done before they are assembled at Chakan, Maharashtra. The engine is made at the Aurangabad plant.
The African market contributed 45% (in volumes) of Bajaj’s exports in Q3, followed by Latin America (17%), Sri Lanka & Bangladesh (25%) and the balance was contributed by the southeast Asian markets. Exports constitute one-third of Bajaj’s total production and, according to D’sa, the company hopes to close the next financial year with 11 lakh units.
The current fiscal will end with exports to the tune of 8.75 lakh units.
Meanwhile, the company has a strong outlook for this year and the next. “We should end with total volumes of 28 lakh units this fiscal, and FY11 should end with 36 lakh units,” D’sa said. “We must also regain our earlier market share of 35% held in 2006-07. Currently our market share is 27%, and this should increase by 700-800 basis points by the end of FY11, provided we can achieve the mark of 36 lakh units and there is no price war.”
D’sa maintained that, on the domestic front, the company wants to focus on only two brands — Discover (commuter segment) and Pulsar (sports segment). “We have already phased out XCD 125, and the XCD 135 is doing negligible numbers, which means the brand will automatically fizzle away as there will be no demand,” D’sa said.
D’sa said it will be a challenge to maintain the 22% EBITDA margins. But Q4 will see margins between 19.7% and 22% and the year.
However, according to an analyst with an international research firm, Bajaj’s margins will be under pressure as the product mix is tilting towards lower margin products such as Discover, and the raw material cost is increasing. Also 30% of Bajaj’s exports are unhedged. 70% exports are locked at Rs 47. The company expects exports to the tune of $700 million, and has taken cover for $500 million for next fiscal, said D’sa.
