Managing director Rajiv Bajaj told a TV channel since the Akurdi plant doesn’t earn any fiscal incentive, the company is losing its competitive edge in the market.
MUMBAI: Desperate times call for desperate measures. Stung by increased competition and a general sales slowdown, which has all but taken the pricing power out from the manufacturers’ ambit, Bajaj Auto, India’s second-largest two wheeler manufacturer, is considering moving production from its one-time mother plant at Akurdi in Pune to Chakan, on the outskirts of Pune and tax haven Uttaranchal, where it has just commissioned a spanking new factory.
Managing director Rajiv Bajaj told a TV channel on Thursday that since the Akurdi plant doesn’t earn any fiscal incentive, the company is losing its competitive edge in the market.
In FY07, Bajaj Auto cut its output from Akurdi by about 1 lakh units to 3.5 lakh.“This year we may cut production by more than half,” said Bajaj.
Production would be moved to Bajaj Auto’s Chakan unit, on the outskirts of Pune, and Uttaranchal, where it is eligible for fiscal incentives. This would give the company the headroom to combat competition from market leader Hero Honda.
Rajiv Bajaj set up the greenfield Chakan plant several years ago against stiff opposition from his father and chairman Rahul Bajaj. The plant is more modernised, has fewer workers, and productivity is much higher than the Akurdi plant.
Rajiv Bajaj hinted that over time, the company may stop manufacturing from Akurdi plant. The company is counting on the launch of its new platform to revive sales.
In September, the company would introduce a motorcycle on a new platform which would marry power with fuel efficiency. It hopes to sell 50,000 units of the new bike per month by March.
Meanwhile, Bajaj Auto has reported disappointing results for the quarter ended June. On a standalone basis, it reported a 4% year-on-year decline in net sales to Rs 2,109 crore. But, a flat expenditure ensured that net profit dropped 15% to Rs 226 crore. Operating profit margin fell to 13.1% from 16.4% last year.
The company de-grew faster than the market during the quarter, indicating that competition has eaten into its market share. Exports were its saving grace, which was up 42% year-on-year to Rs 514 crore.
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