Bajaj Auto Plans Capacity Expansion as Pulsar Demand Regains Strength

India's biggest sports biker maker Bajaj Auto has lost market share over the past 15 months. In fact, from being the strong number two to Hero's number one position, Bajaj has since been overtaken by both Honda and TVS in monthly sales. Now as it fights to regain market share, it is seeing traction for its products, and will therefore have to expand capacity at its Chakan plant.

Bajaj currently makes motorcycles at three locations. The plant in Waluj makes the Platina, CT100 and Discover as well as the Boxer for exports. Pantnagar is the location for the Platina and Discover family, too. And it is at Chakan that its high displacement and also high-margin products are made, namely the Pulsar range, Avenger, Kawasaki Ninja and KTM brand bikes. Again, the production focus here too is a mix of export and domestic sales.

The reason Bajaj is considering the move to a higher production output, despite seeing a decline in demand last year, is because it is now armed with a new range of products. The Pulsar family has now got the NS, AS and RS series - besides the existing 135 cc, 150 cc, 180 cc, and 220 cc Pulsars. The AS and RS have now begun to add to the demand that Bajaj is once again seeing, and so there has been an 8 per cent rise in month-on-month sales since January this year.

In the last quarter of this fiscal Bajaj will also launch the CS 400 - where too it sees a stronger demand than many believe. The newly launched RS 200 has in fact seen a very strong market demand, resulting in a supply crunch. When I met Eric Vas, president of Bajaj Auto's Motorcycle division, he told me the company is well aware of the waiting periods building up on the RS 200. He said, "Certainly, we do have a slight capacity constraint on the race sport currently, we have customers who have been waiting for 45 days for that product and fortunately it is not something unmanageable. We are fairly competent at expanding capacity so we will hike capacity as the market goes along. Maybe it will take us a month, a month and a half to ramp up capacities a little bit, more because constraints at vendors rather than our end."

So in the short-term Bajaj will realign its production by tweaking the number of shifts and daily output from Chakan. But that will certainly not tide it over as demand continues to increase, and the new bikes - AS in particular - gain traction in the domestic and export markets for Bajaj. Add to that the upcoming CS series and future products, and Bajaj knows it needs to increase production output - and more so at Chakan which makes the more sophisticated products. "That is the part of the game. (At) the Chakan plant there is some discussion about capacity expansion," says Mr Vas and a formal announcement on this could be expected in the second quarter of the current fiscal. At present Bajaj has the installed capacity to make close to 51 lakh motorcycles a year (Chakan plant capacity accounts for approximately 12 lakh units), as compared to Hero MotoCorp's 70 lakh and HMSI's 48 lakh unit annual capacity.

As of 1:38 p.m., shares of Bajaj Auto were trading 1.15 per cent lower at Rs 2,227 as compared to a 1 per cent decline in Nifty.