While most of Indian auto industry captains have been demanding a comprehensive stimulus package from the government to arrest the ongoing slowdown and job losses, Rajiv Bajaj, MD, Bajaj Auto, has a different opinion. The outspoken head honcho believes that the Indian auto industry finds itself in a sticky situation which was its own doing.
Speaking to CNBC TV18, Mr. Bajaj stated that the retail motorcycle sales of Bajaj in the recent months have fallen by around 5-7% (YoY). This decline is not large enough to cry for help from the government. He added that the disparity in OEM billing (wholesales) and retail sales is the reason why the current slowdown appears to be larger than it actually is.
While he called for the government not to make an already difficult situation even worse by introducing increased registration fee (now deferred till June 2020) and to reconsider 28% GST on two- and three-wheelers which are not luxury items in the Indian context, he also said that the auto industry’s heightened focus on domestic market is one of the primary reasons for the current turmoil.
Roughly 40% of Bajaj Auto’s two wheeler production is being exported thereby shielding the company from a 5-7% decline in the domestic retail sales. He said most of Bajaj’s competitors as well as passenger car makers have failed to derisk their strategies by going global.
Mr. Bajaj stated that mediocre products (not good enough for global products), lack of innovation in domestic market and inefficient cost structure (imposing very high fixed costs at dealerships) are other primary mistakes by the industry which have ultimately led to the current situation.
Speaking about the elevated levels of inventory at dealerships, Bajaj said that his company will not increase wholesales during this festival season until the inventory level corrects itself completely.
As far as job cuts are concerned, the MD reassured that Bajaj Auto will not reduce its workforce just because retail sales in domestic market has gone down by 5-7%. He reasoned that the salaries account for only 4% of sales revenue for the company and it will be able to save only 0.4% even if it cuts 10% of its workforce. The gain is not worth putting thousands of families in financial jeopardy.
