Companies

What drives Bajaj Auto

Parvatha Vardhini. C | Updated on March 12, 2018 Published on July 08, 2013

A key reason for Bajaj Auto’s high operating margins of 19-20 per cent, is the company’s presence in the three-wheeler segment, both at home and abroad.

With a 42 per cent share, the company is the market leader in three-wheeler sales in the country. Its exports in this category constitute over 80 per cent of India’s total three-wheeler exports.

In 2012-13, Bajaj Auto sold only about 24.6 lakh bikes , compared with 25.6 lakh bikes the previous year, what with the auto sector slowdown. But its three-wheeler sales shot up 11 per cent to 2.25 lakh units, faster than the 5 per cent growth in volumes achieved by the three-wheeler industry as a whole. The company’s annual report for 2012-13 explains how the company achieved this growth. For one, having diesel offerings in this segment helped Bajaj. With the price gap between petrol and diesel widening last year, customers flocked to diesel-powered vehicles.

Second, the report points out that the firm gained from measures taken to correct and expand its three-wheeler sales network and its offering better financing options for buyers through tie-ups with public sector banks.

Finally, with sales directly dependent on opening up of three-wheeler permits by State governments, the new permits issued in Delhi and Jaipur pushed up sales too.

But Bajaj was not as lucky in the export markets. Its three-wheeler export volumes in 2012-13 fell 19 per cent from 2011-12. A key reason for this was the change in duty structure on imports by Sri Lanka, one of Bajaj’s biggest export destinations. In May 2012, Sri Lanka significantly raised the import tariff on three-wheelers.

During February/March 2013, Egypt — another major market for exports — witnessed difficulties in opening Letters of Credit, largely due to shortage of dollars in that country.

Interestingly, Bajaj’s successive annual reports have mentioned how the three-wheeler is used as a ‘personal’ vehicle in Sri Lanka.

It is perhaps with such markets in mind that Bajaj Auto is coming out with the RE60, its quadricycle.

But with the concept being put under the scanner, the annual report remains silent on the plans, prospects and outlook for the RE60. It does mention, though, that commercial production of the vehicle will begin in the second half of 2013-14.

Published on July 08, 2013
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