Bajaj’s 125cc bikes may see price hike on safety norms

Pulsar, Discover and Avenger (125cc and above) motorcycles might see a price hike between Rs 4,000-10,000 post-April 2019 due to the incorporation of anti-lock braking system (ABS) safety norm, Rajiv Bajaj, managing director, Bajaj Auto, said in an interview to a business news channel. Commenting on the outlook for FY20, Bajaj while speaking to CNBC TV18, said: “The two-wheeler industry will face two big disruptions in FY20 – one due to the implementation of safety norms from April 2020 in 125cc and above bikes with ABS technology which will push our prices anywhere between Rs 4,000-10,000. Second, the upgradation of the portfolio to BS VI emission norms will come up with another big cost increase.”

For the eight months from April to November, while the motorcycle segment grew 14% y-o-y at 97,48,936 units, Bajaj Auto grew at 30%, mostly in the entry-level bike segment. Bajaj Auto’s growth can be attributed to the aggressive pricing strategy that it adopted for its entry-level bikes post April 2018. As Bajaj Auto reduced prices of CT and Platina by Rs 3,000-3,500 in order to gain market share, the strategy helped the company ramp up its volumes, albeit at the cost of its Ebitda (earnings before interest, tax, depreciation and amortisation) margin.

Regarding FY19 outlook, Bajaj said that Q4 will be muted for the industry in terms of primary sales from companies to dealerships since the inventory level is 6-8 weeks while it is 4-6 weeks generally.

Bajaj said that while the typical industry structure comprises 20% in the entry segment, 60% in the mid-segment and the remaining 20% in premium segment, the industry is moving towards 35% in entry/commuter segment, 40% midsegment and 25% in premium segment. This implies that the value/mid-segment is getting squeezed out.

He further added that the company intends to foray into the electric vehicle segment by 2020 both in personal segment – motorcycles or scooters – and three-wheelers (quadricycle).

Bajaj Auto Limited