Bajaj Auto is feeling the heat of slowing sales. The Pune-based two-wheeler manufacturer of ICE motorcycles and electric scooters has announced sale of 144,953 units in November 2021 in the domestic market, which constitutes a year-on-year sales decline of 23% (November 2020: 188,196). Worryingly enough for the company, this is a sharp 27% month-on-month decline (October 2021: 198,738).
Exports, which is Bajaj Auto’s strong point, added 193,520 units to the November 2021 tally, which is down 2% on year-ago shipments of 196,797 units. Domestic and export sales together in November 2021 are 338,473 units, down 12% YoY (November 2020: 384,993) and 14% down month on month (October 2021: 391,303).
Things look better for the company on the cumulative eight-month front. The April-November 2021 domestic market sales are 11,74,391 units, down 2% (April-November 2020: 11,93,002). Exports have clocked strong 45% growth at 1.4 million units and helped overall sales to post 20% YoY growth (see data table below).
Demand for entry level bikes still to be pick up
Poor demand in the entry-level motorcycle market is impacting Bajaj Auto, as it is other motorcycle manufacturers. Demand from rural India, the biggest buyer of fuel-efficient commuter bikes, is still to pick up and in urban India incomes are down. Adding to the vexing issue of slackened sales is that retail finance companies are a bit more cautious when it comes to disbursing funds for this segment.
The present slow rate of growth may have been due to Covid-19 but that is not the entire story. According to Rakesh Sharma, Executive Director of Bajaj Auto, the bigger cause is the “progressive increase in taxes and costs for various reasons”, slapping ABS on 150cc bikes, insurance premium going up, the GST levy of 28 percent and so on which has “certainly dampened” demand. He was speaking at Autocar Professional’s Two-Wheeler Conference last month,
Quite unlike cars, the fundamental price elasticity equation is very different for a two-wheeler. “The moment we increase the price by Rs 2,000 we see a plunge in demand,” said Sharma. Again, compared to cars, a moped, scooter or motorcycle is “very much an essential product” which is at the bottom end of the pyramid. “Its demand and growth has a multiplier effect on the livelihoods of people and in the economy,” he adds.
The premium segment takes up about 15 percent of motorcycles and has also been hit by extra price points because of the ABS levy and, more recently “very severely” by the shortage of semiconductors (the fact that it has a more affluent base means that demand has never been an issue). This meant that even when demand was reviving, companies like Bajaj Auto were unable to meet it completely because of the chip crisis. Interestingly, the middle segment (125cc motorcycles) is seeing stronger demand.