Bajaj Auto, one of India’s biggest motorcycle manufacturers, said it is yet to see any down-trading or change of behavior among motorcycle buyers in India due to the COVID pandemic, and that demand is already at 80-85% of normal levels.
Speaking to investors and analysts after the company’s quarterly results last week, executive director Rakesh Sharma said he was quite “heartened” by the fact that the market structure — in terms of the relative shares of each of the different segments of bikes — has remained resilient.
“The customer is not shying away from paying a little bit more,” Sharma said. “This is counter-intuitive. You will not expect that from an economically distressed situation. You’ll expect people to go wholesale for the cheaper version.
“We have not seen that. It is a very similar structure to what we were experiencing in pre-COVID times.”
Bajaj Auto offers a range of motorcycles, starting from the affordable CT 100 and Platina to the KTM 390 series, priced above Rs 3 lakh.
“The structure of the segments is still largely the same,” Sharma said. “It is not that we have experienced a big rush for CT100 kick-start, which is the most affordable motorcycle in the industry.”
Sharma pointed out that under the lock-down, the share of Pulsar — a mid-segment brand — has increased to 50% of its sales in April-June, up from 41% in January-March.
However, driving much of the volumes within the Pulsar segment has been the most-affordable, 125cc model launched a year ago.
However, between the three variants within Pulsar 125 priced between Rs 71,000 and Rs 79,000, it is the most expensive one that is selling the most, pointed out Sharma.
Bajaj also produces India’s most expensive 125cc bike, KTM Duke 125, priced at Rs 1.4 lakh.
When it was launched one-and-a-half years ago, there were many who questioned the prospects of such a costly bike with an engine capacity of just 125cc.
However, said Sharma, demand for this model today exceeds supply by 50% and the company is trying to put in a booking management system to make sure that it doesn’t lose sales.
In fact, says Sharma, Bajaj Auto expects to to cross the 10,000 mark in pro-biking monthly sales in September. “We’ve already given indications to our suppliers.”
MORE VALUE CONSCIOUS
However, said Sharma, it is not that consumers are willing to spend just for getting the premium tag.
While they are willing to spend more, feedback suggests that they now demand something concrete in return, he said.
“The customer is more conscious of value, is testing out the proposition and is asking the questions, and will not pay something extra just for [the sake of] it, but only if there’s something substantial — whether it is the suspension, the disk brake. It has to be something real. [But he is] not shying away from paying a little bit more,” he said.
FUTURE UNCERTAIN
Sharma also commented on the market outlook for the coming months as the COVID-19 pandemic continues to spread in the country.
He said, at one time in July, demand had hit 90-95% of what it had been at the same time last year. This was the case “till the time some lockdowns were announced in Bangalore, Bihar, Orissa and Guwahati, which impacted demand and we are back at 80-85%,” he said.
Given the pandemic, he pointed out, it was almost impossible to make any predictions about how demand will evolve in coming months.
“Forecasting demand is not about forecasting demand, but about forecasting COVID and the response of the administration to the ebbs and flows of COVID. The whole demand depends purely on that.”
RESILIENCE
At the same time, Sharma said evidence — including the continuing demand for premium bikes — suggests that COVID-19 has not caused any enduring or structural damage to demand.
Sales can be impacted by the sheer difficulty of carrying out transactions under lock-downs, or they can be down because of psychological or sentimental reasons, where people postpone their purchases due to uncertainties about future income.
While logistical issues can be sorted out quickly, a downturn in consumer sentiment can be much harder to recover from. But Sharma believes we are not there yet.
“Having seen the demand in 15 days of July and previously, of June, it is very clear that once COVID recedes, and there is some kind of stability in normal life, demand comes surging back. Demand is coming back faster than COVID is receding. It is bubbling under the surface.
“The economic factor and the psychological factor seem to be much smaller, and the larger factor is about the physical interruption which COVID is causing,” he said.
As of last week, 95% of the company’s motorcycle dealerships and 85% of its commercial vehicle dealerships are open.
The situation is not very different in export markets, said Bajaj Auto, which gets about half of its sales volumes from countries such as those in Africa and Latin America.
Demand ranges from 75% to 100% in various markets, with Nigeria recovering from 50% in June to 75% in July.
At the same time, demand for its three-wheelers, such as auto-rickshaws and pick-ups, is down sharply and taking substantially longer to recover compared to that for two-wheelers, Sharma said.