No production cuts for now – Bajaj Auto

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Amid reports that the two-wheeler industry in India is bracing for production cuts to deal with a dip in demand, Bajaj Auto, one of India’s biggest motorcycle maker, said it is not curtailing production as of now.

Bajaj Auto MD Rajiv Bajaj said the company does not feel a need to cut production at present.

“We are not cutting down the production,” he said, speaking to CNBC TV18, adding that the company is trying to increase sales instead. “We were able to anticipate this situation earlier and implemented a clever strategy for promotion of our products in the festive season.”

Bajaj said the company’s current pace of retail sales is around 2 lakh units per month and current inventory is 3.7 lakh units, or about 55 days worth of sales.

In comparison, two-wheeler manufacturers in general are reported to be burdened with inventory of around 80-100 days against the normal level of 20 days.

In response, competitors like Hero Motocorp, Honda Motorcycle and Royal Enfield are reported to have cut their monthly production by around 15% from the current month till May, by when the general elections too will be over.

Rajiv Bajaj said his company is trying to bring down inventory by increasing sales.

“We are not happy with 55 days of stock. We can either reduce stock to 45 days by reducing the inventory or we can push up the retail…You will see it moving up and I’m very confident that in next 2-3 months to 2,50,000 and thereabouts,” he added.

The company had sold 1.87 lakh units in the domestic market in February.

Various factors, including the drying of liquidity due to withdrawal of funds by foreign investors, has affected economic activity in the country. This has, in turn, affected consumer sentiment and demand for discretionary purchases like automobiles.

Sales of two-wheelers fell 8% in February, according to Automobile Dealers Association (FADA).

The sales in the overall automobile sector in India has been declining since September during the current fiscal, crimping industry growth to 6.95 per cent between for the first 11 months of the current financial year, compared to the 14% in the year ago.

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