Bajaj Auto’s motorcycle sales in the current financial year are likely to grow more than the 15 per cent projected for the industry, analysts said on Thursday.
The company’s plan to invest Rs 200 crore in capacity and buy a stake in a Philippine two-wheeler producer would boost sales.
However, despite a record growth of nearly 53 per cent in domestic sales in April, Bajaj’s motorcycle sales in the rest of 2005-06 are likely to slow.
Bajaj’s 53 per cent sales growth in April was due to a low base, they said.
This big jump in sales would continue for 2-3 months, and then taper off.
Huzefa Suratwala of Angel Broking expects Bajaj’s mobike sales in 2005-06 to dip to 23 per cent from 38 per cent in the previous year because of a higher base.
Yet, India’s second largest mobike producer would outperform the industry because of increased demand for bikes, the expected good sales of the new Pulsar bike Bajaj plans to unleash soon, and sales of existing models, he said.
The Rs 200-crore investment in capacity expansion over the next 18 months will help Bajaj corner a larger market share, analysts said.
LOW BASE HELPS
“A lower sale base of Bajaj before the launch of CD 100 and Discover mobike models in the middle of last year has helped the company show a higher percentage growth this April. This ripple effect is likely to continue for 2-3 months,” said an analyst from a brokerage said.
Suratwala agrees: “For Bajaj, the sales growth in April was a result of a combination of factors, including lower base, a rise in demand and good sales of CD 100, Pulsar and Discover.”
The biggest player in the Indian mobike sector, Hero Honda with a much larger base, is likely to grow in line with the industry.
“Hero Honda has still not announced any plans of increasing its capacity,” said Kalpesh Parekh of ASK Raymond James & Associates.
“In order to increase its market share further, Hero Honda Motors has to increase its capacity,” he said.
In 2004-05, Hero Honda held a 52 per cent market share followed by Bajaj at 27 per cent.
While Hero Honda plans to roll out two motorcycle models in 2005, chairman and managing director Brij Mohan Munjal said, as of now, it had not prepared any capacity expansion plan.
While Hero Honda produced 2.6 million motorcycles in 2004-05, Bajaj Auto produced 1.5 million.
The two-wheeler industry is likely to grow 15 per cent in 2005-06, said Sachin Mathur head of CRIS INFAC, the research arm of CRISIL Ltd.
Persisting good demand in the rural market has pushed motorcycle sales up.
While Bajaj’s market share is expected to rise, some smaller players share such as LML Ltd. and TVS Motor Co is forecast to slide.
LML plans to launch a new entry-level motorcycle by August and aims to capture a 10 per cent share of the entry-level segment.
Our typical marketing budget is usually 10 per cent of the topline spend