It’s been a particularly bumpy ride for Bajaj Autos in Q2. It’s exports have clocked sequential degrowth for the fourth month on the trot. One of the highest exporters of motorcycles, the two-wheeler major clocked 28 percent (YoY) decline in its exports in November. On an average exports have declined between 15-20 percent every month when compared with the year-ago performance.
Independent market analyst, Anand Tandon explained that Bajaj Auto’s exports fell till Q2 largely due to two factors- decline in sales across Africa and a strong dollar. “Nigeria has banned two-wheeler taxis since last November, Egypt had imposed a ban on three-wheelers. The management also mentioned that strong dollar and low availability of dollars in their export markets impacted sales in LatAm and Africa, while ASEAN countries performed well. This was all upto October. The export numbers were expected to be better in Q3 which we will have to watch,” he added.
However if the November numbers are any indication, the downtrend is seen continuing even in Q3. AK Prabhakar, Head of Research, IDBI Capital pointed out that “Higher crude prices and rural stress had some impact on two-wheeler sales.Going forward the rural pick-up is seen that would boost local sales. Exports market would take time to recover.”
In fact most industry experts don’t see the slowdown in exports as a huge problem for Bajaj Auto, given the scale of operations. Deven R Choksey, MD, KR Choksey Investment Managers highlighted that for a company that is operating in 70 countries, “If any of these economies face any problem, it poses a challenge for Bajaj Auto in terms of product demand. Don’t see it as a huge problem, It is a function of the current disturbances in the the geopolitical condition.” Choksey beleives that once the situation comes under control globally, it is likely to resolve on its own, “Just like in case of the semiconductor situation, the export market for two-wheelers is suffereing due to the geopolitical situation.”
The management expects normalcy in exports to be restored in a couple of quarters, especially in the light of the continuing geopolitical tension and the Ukraine-Russia conflict. Analysts also see this as an oppportunity for Bajaj Auto for recalibrating its business model going forward.