‘Fog Of Uncertainty’ Clouds Bajaj Auto’s Festive Sales Outlook
Bajaj Auto Ltd. is not sure how sales in the festive season will pan out. Yet, the two-wheeler maker pushed stocks to dealers.
In the domestic motorcycle business, the fog of uncertainty is still around, Rakesh Sharma, executive director at Bajaj Auto, said during a post-earnings investor call. “It will still surround us till the next month or so.”
There’s still fragility in the supply chain, but if demand overshoots expectations, the firm doesn’t want to be “left stranded for vehicles”, Sharma said. “It’s perhaps better to be on the side of abundance and make sure the stock is there,” he said, adding that the company has an inventory of 35-48 days.
If retail sales don’t match up, Bajaj Auto will have to take some action in November, Sharma said without specifying any details.
Recovery during the festive season is crucial for India’s auto industry that was battling a slowdown even before the pandemic, which completely stalled production and led to a washout initially. Sales picked up after the nation—fighting the worst economic downturn in decades—restarted most activities to revive sentiment and growth. But a complete recovery is still some time away.
Bajaj Auto’s domestic sales declined 10.2% from the year ago to 10,53,337 units in the quarter ended September, while exports slumped 11% to 4.79 lakh units. Its revenue fell 7% over the year ago to Rs 7,156 crore. Net profit dropped 19% to Rs 1,138 crore in the reported period.
The company, however, said its flagship Pulsar and other high-end vehicles helped cushion the impact of Covid-19. “[We’re] seeing major upside in the 125 cc segment,” Sharma said, adding the company sold a record 384,561 units of Pulsar motorcycles during the second quarter.
Also, banks, according to Sharma, are more forthcoming in financing upper-end vehicles, but cautious of financing entry-level vehicles—another factor that helped drive the premiumisation trend. Bajaj Auto’s operating margin improved to 17.7% in the July-September 2020 from 16.6% a year ago.
Sharma agreed that financing was severely hit due to lockdown restrictions, as banks turned cautious, unsure of customers’ ability to repay after the pandemic shut down businesses, leaving several people jobless. Bajaj Auto even lost some sale because of cautious financing, he said.
Last month, BloombergQuint had reported that banks and NBFCs have turned cautious and stricter over vehicle refinancing.
While financing has improved, it is behind last year’s levels, Sharma said, adding it’s “returning quite well.”