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Automobiles

Bajaj Auto's domestic motorcycle sales skid amid shift to new fuel norm

Firm warns underlying demand in domestic market declining 8% to 10%

Bajaj's weak performance underscores persisting troubles gripping India's automobile sector.   © Reuters

MUMBAI (NewsRise) -- India's Bajaj Auto reported a 22% slump in domestic two-wheeler sales for January and warned of more pain to come, as a shift to less-polluting but more expensive models weighs on demand.

The company's January sales of two-wheelers in India plunged to 157,796 units from 203,358 units a year ago, it said in a statement Tuesday. Total two-wheeler exports, however, surged 19%. That tempered the overall sales decline in the segment to 5%.

Total sales, including commercial vehicles, declined 3% last month, Bajaj said. Overall exports, which account for 45% of sales, jumped 15%.

Bajaj's weak performance underscores persisting troubles gripping India's automobile sector as it contends with its worst-ever downturn amid weakening consumer sentiment in a slowing economy.

A shift to a new fuel emission standard and higher regulatory and insurance costs have further crimped demand for two wheelers.

Last week, Hero MotoCorp, India's largest two-wheeler maker, reported a 14% decline in January sales, hurt by an 87% drop in scooter sales. The Federation of Automobile Dealers' Association that tracks retail sales in India said two-wheeler registrations fell 16% in December amid high inventory.

"The optics looks even worse than what the reality is," Rakesh Sharma, executive director at Bajaj Auto, told CNBC TV18 Tuesday. Underlying demand in India is still declining 8% to 10%, he added.

The company has yet to see any demand for the new Euro VI emission standard vehicles, Sharma said, even as India heads closer to the April deadline for the transition.

The sales of Euro VI models will commence only when people realize they have no other option, he added. The new vehicles are likely to be costlier by 7,000 rupees to 10,000 rupees a unit, and that is "severe," he said.

Sharma expects the April-June period to be "very difficult" because of the transition. He had previously warned that the industry would see a "big dent" in the first six months of next fiscal year if the government did not offer any sops in its federal budget. The budget, unveiled on Saturday, did not include any such incentives.

The industry is over-regulated with a new series of rules that will cause costs to spike by 30%, Rajiv Bajaj, Bajaj Auto's managing director, said at the launch of the company's first-ever electric vehicle Chetak last month. "This hurts the common man the most as two-wheelers are bought by them."

Top Indian auto makers Maruti Suzuki, Tata Motors and Mahindra & Mahindra reported a mixed bag of January sales numbers last week. Maruti reported an overall 1.6% increase in January sales of cars and sport-utility vehicles, while its domestic sales of passenger vehicles remained little changed.

Mahindra & Mahindra, one of India's largest SUV makers, reported a 6% decline in sales in January, while passenger vehicles saw a 17% slump. Mahindra blamed the decline on the ramp down of its older fuel emission standard vehicles and the shift to vehicles per the latest norm.

Shares of Bajaj Auto fell 3.9% in Mumbai trading on Tuesday, its highest single-day fall in more than six months. The benchmark S&P BSE Sensex surged 2.3%.

-- Dhanya Ann Thoppil

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