"There is nothing like a divide for two wheelers between rural and urban. Some of the most low-priced vehicles, two wheelers are bought in urban areas and some of the more expensive motorcycles are bought also in rural areas," says Rakesh Sharma, ED, Bajaj Auto.
Things are looking good. Growth is back. Margins are 20% and market share is intact.
Well, market share has improved. But yes, for the moment, things are looking good. I hope they stay this way.
Historically, we have always seen that rural economy acts as a barometer of the two wheeler demand. But of late, we have seen two wheeler demand coming back despite a slowdown in the rural economy. So, whether I look at the monthly dispatch numbers of Bajaj Auto, TVS or Hero MotoCorp sales are coming back and the rural economy is yet to come back. Why is that history is not repeating itself?
First of all that assumption is flawed to begin with in my opinion. There is nothing like a divide for two wheelers between rural and urban. Some of the most low-priced vehicles, two wheelers are bought in urban areas and some of the more expensive motorcycles are bought also in rural areas. It is about segments. I would rather look at different segments like the 100cc, 125cc, 150cc segments to understand what is happening in the market. But dividing it between rural and urban for us does not make so much sense.
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We spoke to you last time and I distinctly remember we had this very engaging conversation when I was in Pune. Your view was that things for the domestic market will stabilise and things on the export market will pick up and EV launches is something you are excited about. Let us look at all those three factors. Are we in for a year of positive surprise for the domestic market?
Yes, I think things have stabilised, not just stabilised, they have improved since the last two or three quarters the domestic market is turning in a nice growth.
We expect the markets to be growing at about 7% to 8% in the coming year with the upper half of the industry growing at perhaps 2-3% points more and the bottom half growing at 2-3% points less than the average of 7% to 8%.
So, it is looking like a good sort of year to expect. There is consumer optimism. We can see that reflected in loan tenures which people are taking, the penetration of retail finance.
There is more certainty of income. So, all these indicators are quite positive for the domestic market. So, the next was, you had asked about exports. Exports, we had expected the industry to start picking up, but that pickup has been rather slow.
It has definitely bottomed out. But there are three or four markets which are unfortunately large markets for us, where there is still trouble and things will take a little more time to stabilise.
These are places like Nigeria, Kenya, Bangladesh, Argentina. So, what we have done is, for our FY25 planning, we have taken a very sanguine view of these troubled markets and the rest of the markets which are mostly in ASEAN or Latin America and little parts of Africa, we are seeing a good recovery in these markets and we have taken a very aggressive view in these markets.
Added to that is some new markets and new segments which we are entering. Brazil is going to get unlocked with the local plant coming on stream in June and we are expanding our footprint in Europe next month, etc.
So, when I put all these things together, a very-very cautious view of the troubled markets, a slightly more aggressive view of our recovery in the recovering markets, and our progression in the new markets and segments which also include, for example, quadricycle in Egypt. I would say that FY25 can be expected to be better than FY24 in exports.
So, looking at the two-wheeler industry construct right now and let me add three-wheelers as well in here, more pertinent to your business, who is going to win the battle eventually? Is it going to be on fuel efficiency? I mean, you already have a CNG bike launch. The world is talking about moving to renewable energy sources and that goes for autos as well as a segment or is it going to be purely on affordability and durability?
Well, first we have to separate out two-wheelers and three-wheelers because three-wheelers are largely commercial vehicles. They are used as taxis, so that is driven by a very different set of attributes. But in two-wheelers, if you take motorcycles, if you take a market as large as that of India, which is we are clocking now 9 lakhs to 10 lakh motorcycles per month, obviously there is no singularity which is driving the markets. There are segments. In such a large market, obviously, segments start to appear.
We have a bottom half of the market which is largely driven by fuel economy, mileage, those kinds of things and we have the upper half of the market which is people wanting to buy a better bike, features and then right at the top is the, I would say, performance-driven, style-driven market.
So, it is a mix of attributes and it depends on which segment you decide to focus on. So, I would not single out any particular attribute which if you conquer, you will be able to win big time in the market. There is no silver bullet.
All eyes have been on the CNG bike. Do you think we will see that switch to the newer technology and on the sales front for the initial years can you give us an assessment as to what you are expecting?
Well, like I said that the bottom half of the market, the 100-125cc market is largely mileage conscious, fuel-economy driven. So, with the CNG bike, we are taking aim at this market. This is about almost more than half a million, almost about 600,000-650,000 units market.
And like I said, it is driven by fuel economy. So, with the CNG bike, what happens is that the fuel bill for our average household drops by almost 50% which is quite significant. Even if a person is driving 30-40 kilometres a day, 25 days a month, then he ends up saving Rs 2000 and that is quite a bit when you take it at an annual level.
So, it is aimed at that. Now, almost 70% of the industry is covered by the CNG infrastructure. As you know, the government has been rolling out their CNG programme very-very effectively, 70% of the districts are covered and so therefore one can say that almost 70% of this market has got CNG availability, though it will require a slight shift in behaviour in terms of people going to particular pumps, etc.
And what we are doing is that along with this promise of having the monthly bill, we are also packaging in the proposition, comfort and a standout style.
So, it is not just about buy this product. I think it will be a product which people will be very proud to own and we have seen in three wheelers, for example, that wherever CNG three wheelers enter, almost within two-three years the diesel and the petrol three-wheeler owners shift to CNG.
So, it is pretty attractive proposition. So, we have hope. We are first going to launch in Maharashtra and then state by state roll it out.
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