Thursday, March 08, 2007

Bajaj plans bloodbath before 100cc exit

Signalling a bloodbath in the motorcycles space next quarter, Bajaj Auto has written to its dealers (a copy of the letter is with FE) that it will slash the price of its 100cc Platina by around Rs 3,000 (9%) effective March 10. That would make Platina the cheapest bike in the market, more affordable than Hero Honda’s CD Dawn.

Industry watchers see this as Bajaj’s attempt to hurt the margins of Hero Honda Motors, the market leader and the largest player in the 100cc segment, just before Bajaj exits the 100cc market as scheduled in mid-2007. Hero Honda is already under pressure with analysts expecting single digit net margins for the first time in history in the Jan-March quarter. If it responds to the Platina price cut, margins could get even thinner.

In an e-mail to its dealers, Bajaj Auto’s vice president, marketing and sales (two-wheeler), S Sridhar, wrote, “Platina would drive huge growth for us and this would be experienced in March, April and May '07. We are fully prepared for the post-Holi marriage season gameplan.”

The move comes at a time when Bajaj Auto’s sales showed negative growth. In February, Bajaj Auto sold 1,74,220 units, down 3% as against 1,79,880 units in the same month last year.

Platina’s new price, Rs 31,714 (ex-showroom in Uttar Pradesh), would break the 100cc segment's price barrier set by Hero Honda's cheapest model CD Dawn (Rs 31,900). Of late, the sales of the newly-refurbished CD Dawn have taken off, spurring Hero Honda's overall sales and helping it widen the lead over Bajaj Auto. During February, the gap between Hero Honda and Bajaj once again widened to 1.06 lakh units, up from 37,883 units in September last year.

According to auto analysts, Hero Honda's current product mix, including the renewed CD Deluxe, CBZ X-treme, Passion Plus (limited edition) among four others has helped the company thwart Bajaj's gameplan to overtake the number one bike manufacturer so far. Bajaj also intends to price its 125cc-plus bikes in the same range as that of the 100cc bikes in the market.

“Our move to exit 100cc segment and making new bikes with high value proposition for customers are bound to move not only Bajaj customers but the whole of 100cc customers in favour of the new bikes. Platina, which sells around 60,000 units a month, accounts for nearly 10% of the 7 million units domestic bike market,” Sridhar said in his mail, adding that the launch of new bikes will take four to five months from now.

Source:- FinancialExpress