Bajaj closes in on Hero Honda

Bajaj closes in on Hero Honda

Author | Source: The Economic Times | Saturday, Sep 02,2006 8:31 AM

Bajaj closes in on Hero Honda

Bajaj Auto has pulled closer to Hero Honda in the number of motorcycles sold each month, raising the possibility of an imminent change in the leadership position in the world's second-largest bike market.

Pune-based Bajaj sold 180,570 motorcycles in August, a 21% growth over the year-ago period. Hero Honda, which had dominated the industry till recently, announced a 15% drop in sales to 2,08,576 bikes due to a four-day shutdown, stock pile-up at dealers and strong competition from Bajaj's Platina and Discover.

The gap between the two has now reduced to just 28,000 units from over 100,000 units a year ago. The development poses a big threat to Hero Honda's exalted position in the 7m per annum bike market. After years of trying, Bajaj looks increasingly likely to overtake Hero Honda very soon.

“Hero Honda's plant was shut for a few days last month for maintenance work but that is not the real problem here. These monthly sales figures only represent despatches to dealers and not actual retail sales. Hero Honda's stock has been piling up with dealers for some time now and it was only a matter of time before their orders slowed down,” said a Mumbai-based analyst.

Bajaj shares rose 3.44% to Rs 2,790.3 on Friday, while Hero Honda shares inched up 0.7% to Rs 726.1. Hero Honda officials declined to comment on the sales figures.

Industry experts paint a pretty bleak picture for Hero Honda in the short term. They say everything will depend on Hero Honda's launching that one key product in the 125cc segment which can take on Bajaj's new challenge (Platina and Discover) and reinforce its leadership position. Also, Hero Honda's barely-there presence in the growing executive segment (150cc) does not bode well for the company.

But, Hero Honda is already working over time to make up for lost time. The company is gearing up to launch seven new products this year and keep up that tempo in future. Earlier last month Hero Honda announced a Rs 1,900 crore investment in Haridwar along with its ancillaries for a new motorcycle plant.

The plant will be operational by May '07 with an initial production capacity of 5,00,000 units, at an investment of approximately Rs 300 crore. By '10, the investment will go up to Rs 1,900 crore in the new plant, achieving a capacity expansion to 1.5m units.

Unlike other industry observers, Bajaj Auto chairman Rahul Bajaj took a rather benevolent view of things. “Sales keep going up and down. We did well with our Platina and Discover, but Hero Honda must have already charted out a comeback strategy. It's a good company,” he said.

Far from uncorking the champagne, the top brass at Bajaj Auto, for some time now, has even abandoned the rhetoric of wanting to overtake Hero Honda. The company has been singing a different tune, that of international presence and global leadership. Nevertheless, the day Bajaj finally pips Hero Honda in sales seems unlikely to be far off.

Tags: e4m

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