Bajaj Auto Projects August Growth Encore On CNG Foray, Successful Launches
There have been at least half a dozen product launches, and almost all of the new products have performed well, said Bajaj Auto's executive director Rakesh Sharma.
Bajaj Auto Ltd. will continue to top industry peers given the tailwinds, while the automaker now focusses on expanding the reach of its CNG motorcycles, according to its top executive.
The more-than-expected August auto sales is not a one-off, Rakesh Sharma, executive director of Bajaj Auto, told NDTV Profit in an interview. The company will continue pursuing strategies for several quarters in to the future to spur growth, he said. There have been at least half a dozen product launches, and almost all of the new products have performed well, helping in expanded sales and growth, he said.
As the Indian auto industry continues to do well, Bajaj Auto will be able to sustain faster growth than industry growth, Sharma said.
Bajaj Auto reported a 16% year-on-year growth in its total vehicle wholesales, including exports, at 3,97,804 units in August. Total domestic sales rose 24% to 2.53 lakh units in the previous month, compared to 2.05 lakh units sold in the same month last year.
The Pune-based automaker's total addressable market for CNG Motorcycle currently stands at about 32%, the executive director said. By the end of September, it should be 80%, and by October, almost 100% coverage should be done, he said.
As capacity is falling despite demand, Bajaj Auto's first priority is market coverage and capacity addition, he said. The automaker is planning on increasing the capacity of CNG Motorcycle from 10,000 to 20,000 units per month in September and is preparing for a capacity of 40,000 to 50,000 units in January-February, Sharma said.
"We are evaluating the expansion of CNG motorcycles from a single to multi-brand as well." Chetak EV should be available in about 3,000 stores by September end and more different types of Chetak's in the next few months, he said.
The focus has been on the top half of the motorcycle segment through targeted new product launches at different segments, he said. "All of them have driven the sales, and in particular the new CNG bike has added incremental business in the last month."
Watch The Interview Here
Here Are The Excerpts
Let's start with the August numbers though of course, there is so much we want to unpack and so much happening with Bajaj. But let's unpack the August numbers first and what in your view has revved up the domestic growth that we have seen for 30%?
Rakesh Sharma: Well, you know, it has been a... focus strategy, which we have been playing down over the last several quarters, which has been focusing on the top half of the motorcycle segment to targeted new product launches at different segments, beginning from 125 CC and going up to 400 CC.
I must say that all of them have driven the sales and in particular, of course, something which is added incremental business to us, specifically last month in August, has been the new CNG bike, where we retailed about 5,000 units and invoiced our dealers about 9,000 units. So that further added to something which has been already on a roll for the last several quarters.
What I'm trying to understand, Mr Sharma, is that, is this a one-off? Is this the new normal? Are you going to see this space of growth? Is this, for example, a culmination of all of the efforts that have been made?
Rakesh Sharma: Yes, that's exactly what I said. It's not a one-off. We've been pursuing this strategy for several quarters now. There have been at least half a dozen product launches ranging from the 125 CC to the 400 CC, which have split this 50% of the motorcycle business into different sub-segments and all of these product launches, almost all of them, I think, have performed very well.
So, in combination, they have gone towards expanding our sales and providing a growth and on top of that, the new CNG bike, which obviously is, again not one of but it is something which is a very substantive initiative into the value-conscious segment, which spans the 100 to 125 CC landscape, and that is brought in incremental business. We obviously, therefore, expect that as the Indian industry starts to be in the positive zone and continues to do well, we should, because of these things continue to grow faster than what the industry is doing.
Great time to talk to you about Freedom 125. You talked about CNG. What are the volumes looking like? Do you have ballpark numbers for the next six months, and will we see a larger portfolio more in the CNG category?
Rakesh Sharma: Yes, for the moment, we are obviously wanting to cover the entire country with the CNG bikes. In August, we were at about 32% of the coverage of the addressable market, the addressable market being those markets which are served by the CNG gas network.
By the end of September, we should be at 80% and then in October, almost 100% wherever the CNG gas station is, this bike will be available in the stores of Bajaj Auto. Last month, we retailed about 5,000 units, and we are increasing capacity from 10 to 20,000 units in September and preparing for a capacity of 40 to 50,000 units in January, February, and hopefully the retails will follow the same trajectory and be in that region.
So big scale-up. More models in this category, or we push on Freedom for a bit?
Rakesh Sharma: Right now, there are three models which have been announced, out of which two have been placed in the market. We will have a third one very soon, which has been announced, and we are indeed evaluating further expansion of the portfolio. But as you can imagine, right now, the capacity is falling behind demand. So, our first focus is coverage of the market and putting in the capacity. We also want to observe very closely how this thing is unfolding, because it is an absolutely new category and whilst there is a substantive benefit that the customer gets in terms of fuel economy and savings of the commuting bill, as well, as, you know, having a very good bike, comfortable bike to ride on.
But there is an ambiguity about the customer experience one gets at the filling stations of CNG and the customer makes the choice by balancing both the benefits and the experience one gets. The CNG companies have been very supportive, but as the volumes increase, you can imagine that there will be a pressure on the CNG companies. So, therefore, we have to see what kind of role that experience plays in the expansion of the business. Therefore, while you're preparing for capacity, the early feedback from the customers is very heartening, and we are very optimistic. But at the end of the day, we have to see how these two positive and engineering forces balance out.
Is the experience of the customer also a factor, when you're looking at your EV play, because the EV segment has done very well. This month, you've increased market share, remarkably, one would say, eating into a large player who listed recently as well. Just wanted your commentary on how you are looking at the EV portfolio?
Rakesh Sharma: Well, like we have been saying, that this is a very important portfolio for us, because, again, it is bringing in absolutely new business to Bajaj Auto. We were not in scooters and the ENE transition of ice to EV, that transition is first happening in the scooters area. So, it is bringing an absolutely new business, and we are chasing it quite vigorously.
There has been a lot of work which has gone in on the supply-chain side, both in terms of, you know, product chemistry development, as well as vendor development and new sources development, which, when put together, has not just reduced cost, but improved certainty of supply, increased capacity, which has allowed us to now distribute the Chetak, not just in the branded exclusive stores, which are very important to deliver a good customer experience, but also expand our reach dramatically by putting it in our motorcycles network, which now, today Chetak, by end of this month, should be available in about 3,000 stores.
So this combination of, you know, exclusive stores and motorcycle stores is giving us a very, very good play and coupled with the new product which we have launched, which is, you know, at a 1 lakh and below 1 lakh price, which has got received extremely well. That has driven the market share very substantively. We expect this to continue, and we will be very, very rigorously pushing for this customer.
More EV launches in the pipeline, Mr. Sharma and more in the Chetak brand or will we see a premium kind of an EV play as well?
Rakesh Sharma: Well, Chetak has already got a premium offering, and their portfolio will expand. It will get renovated. There's a lot of work. Obviously, I cannot be precise about when these things will be done, but I can tell you, it's not in the medium term. It's in the, let's say, next two months, that you will start to see more different types of Chetaks coming into the stores and on the roads.
Just trying to understand strategically, Mr. Sharma, that for those who are looking for an EV two wheeler, do you know very large traditional brands like Bajaj Auto have an advantage over newer brands that are pure EV plays? Is this an advantage or a disadvantage? Trying to understand how you have read the market?
Rakesh Sharma: Well, let me say that today, the customer is very savvy and I don't think the customer is really, you know, putting out labels like a traditional brand, Legacy brand startup, I think they are evaluating a machine, a product, a brand, for what it is to do, just because we are a 75-year-old company and we enjoy a lot of trust, that doesn't mean that we can get away with any product. We have to work very hard to satisfy the customer, as the customer stands today with his and her needs and desires and requirements.
So, I think the customers are able to sort of look at both qualitative, quantitative, both the physical and the non-physical parameters very, very clearly. Therefore, these kinds of things don't, at least in the customer’s eyes, give you an advantage or a disadvantage. There can be other kinds of advantages which we have, which is a very wide network, deep supply chain and vendor network and a very trained manpower.
Those kinds of which a new company has to build up. Those are different kinds of advantages. But in the customer's eyes, I think everyone stands equal. It's the product then which does the talking and the post sales experience which a company can deliver, whether it's a startup or a traditional company.
Okay, fair enough. But, you know, the market-share story is another one. You know, it tells another story itself. Just a couple of more points, Mr. Sharma, that I'll take with you, since I've had this opportunity to speak with you. Just want to know your take on Flex Fuels. This is something that the government and the minister have been talking about. Two-Wheeler companies have also come in and said, Yes, we will look at Flex Fuels. This is something that, policy wise, is a big push. What is your take on this?
Rakesh Sharma: Yes, I think it's a very important initiative and what we believe is that our issues as we have you know, billions of people moving around and the requirements of mobility are increasing exponentially, and we have to balance this with all the issues around the environment, etc. So when you take cost, cost of acquisition, operating-cost environments and different use cases which are there. Some people travel short distances, some people travel long distances, there are good roads, there are bad roads requiring large fuel, small fuel, large wheels, small wheels.
Then there is the whole fuel distribution network. When you put all this together, it becomes quite clear that a good solution in a country like India would be having multiple fuel solutions which address different sub segments. There is no one single silver bullet which will solve all the problems and meet all the challenges. So we think that ethanol, CNG, electric, gasoline, will coexist and to some extent, you will see the three-wheeler business today, our dealerships and three wheelers are selling diesel, petrol, LPG, CNG, electric, and very soon, ethanol-based three-wheelers, so six fuel systems.
The reason for that is that is what it will take to address the problems as well as satisfy the requirements. So, we are pushing hard to build a portfolio of flex-fuel products also, and we feel that these can coexist. But of course, on the other side is that the government and the public sector companies are to provide the infrastructure, so that the customer can easily get access to the different kinds of fuels and come close to making perfect choices.
Just a point on the Fame III regulations, and we are reporting that they could be coming in as soon as mid-September. Just want to understand if Bajaj Auto would be in play for this. Would you meet the localisation norms? Does this work out for you in any way?
Rakesh Sharma: Yes, we are already meeting the requirements and unless you know, Fame III comes out with a completely different set of requirements from whatever I've understood, there has been a lot of continuity between Fame II EMPS, MPS and MPs to Fame III. There has been good dialogue between the government and industry, which has allowed the industry to manage these transitions at the backdrop of the elections, etc. These transitions, I must say have not been disruptive, either for the customers, nor for the OIS and therefore we feel that similarly, EMPs should transition into Fame III seamlessly.
