Car News

Bajaj Auto Ltd, the 2nd largest manufacturer of two-wheelers in India,
reported less growth compared to its peers and its production
constrains, decreasing brand image, market acceptance detoriating
quality & inability to achieve target sale stock looks struggling.
For the next two years in the domestic market, Two-Wheelers segment
average growth may be 8% to 10% as compared to previous two years
where average growth has been 20%. While Bajaj Auto growth will be
negative as compared to Honda, Hero MotoCrop, Yamaha & Suzuki.
FIERCE COMPETITION:
Bajaj Auto's are facing constraints to sell off their current capacity
to the fullest. Currently their total production capacity is 4.5 lacs
units while the sales for the December has been 3.05 lacs units
which is only 68% of utilization of its capacity and within a couple
of months we assume that their sales will be 2.5 lac units which will
be only 56% of utilization of the capacity. Whereas Hero MotoCorp is
increasing its production capacity to 10 million units while Honda is
emerging in a very big way and it is doubling its production capacity
to 4 million units within a year. Suzuki is also doubling its
production capacity and Yamaha is on a verge of tripling its
production capacity. Italian based Piaggio is also penetrating in the
two-wheeler segments with attractive variations of bikes by 2nd
quarter of 2012.
Good news for Bajaj is they are concentrating more on an export front
and sale has been 1 lac units / month , but bad news is that it will
get a hit in a very big way by its competitors Hero MotoCorp and
Honda and its export sales may go down to 50000 units / month. Hero
MotoCorp has set up 1.2 lacs units /month production capacity plant in
Sanand (Gujarat project near Ahmedabad) dedicated 100% export whereas
Honda, through its China plant has introduced its new variant (pricing
31,000 INR) in Nigerian and South African market (Nigeria and South
Africa contribute 50% export sales of Bajaj Auto). Hero MotoCorp has
initiated its distribution network in all the 11 countries where Bajaj
is exporting
In three-wheeler segment, Bajaj Auto growth has been negative while
Piaggio is increasing its capacity along with TVS and Mahindra
decreasing the market share of Bajaj.

This fierce competition in two and three wheeler sector is affecting
Bajaj's survival in industry and it seems that it will not able to
stand the competition after 6 months.
MARKET RESEARCH ON TWO WHEELER SECTOR IN INDIA:-
According to market research performed on consumers the most preferred
brand of two-wheelers is Honda which has replaced Bajaj's 2nd position
on Dec 2011, and TVS which is aggressively marketing in Eastern India
will replace to 3rd position in 6 months downgrading Bajaj to 4th
position. And within 2 years it will further downgraded to 5th
position giving its way to Yamaha in Indian market.
We interacted with Bajaj Auto dealers as they said; Bajaj is
increasing inventory with their dealers and distributors. Thus the
sales recorded by Bajaj in last 5 months are not consumer sale but the
inventory sale of dealers and distributors. Hero MotoCorp & Honda has
waiting period ranging from 4 - 8 months whereas Bajaj's bikes are
overstocked with the dealers
CONCLUSION:
Indian player getting affected due to entry of Foreign player:-
Just like in Television segment, Onida, an Indian player got affected
due to entry of foreign player like LG, Sony and Samsung and in Fridge
segment, Godrej, Kelvinator and Voltas got affected because of
Whirlpool, Samsung and LG or in Air conditioner segment, Voltas and
Carrier got affected because of Hitachi, Daikin and OGENERAL and in 4
- Wheeler segment, Fiat and Ambassador got affected because of Suzuki,
Hyundai and Chevrolet. In the same way in 2 - Wheeler segment Bajaj
and TVS is getting affected due to entry of foreign player like
Honda,Yamaha, Suzuki and Piaggio.

Thus studying the fundamental and technical aspect of Bajaj Auto, it
is trading at its highest level and we recommend a STRONG SELL on
Bajaj Auto at CMP 1495 with target of Rs.1100 in 3 months and further
going down to Rs.700 within a year.

--
You received this message because you are subscribed to the Google Groups "Car Dealership looking for medium-term investor" group.
To post to this group, send email to car-dealership@googlegroups.com.
To unsubscribe from this group, send email to car-dealership+unsubscribe@googlegroups.com.
For more options, visit this group at http://groups.google.com/group/car-dealership?hl=en.