Bajaj Auto to switch to CKD assembling at Indonesian plant

This move will attract lower Customs duties.

Bajaj Auto plans to switch to assembling completely knocked-down (CKD) parts of its motorcycles in its Indonesian plant in the second half of 2010-11, as it will attract lower Customs duties. The company now assembles semi-knocked down parts.

The Indonesian subsidiary, PT Bajaj Auto Indonesia, assembles and markets Pulsars. The subsidiary has localised some of the assembly operations to bring down the customs duties. It will continue to pursue the localisation of sub-assemblies in 2010-11, the company has said in its 2009-10 annual report.

The product portfolio in Indonesia will be expanded under the Pulsar brand with the Pulsar 135 LS . “Indonesia, being a light weight, high acceleration step-through market (bebek), Pulsar 135 LS will be positioned competitively to upgrade from bebek for the thrill-seeking youngsters,” the company says in the annual report.

(Indonesia is a large step-through market in which Bajaj Auto is trying to make a mark by selling motorcycles.)

With the addition of Pulsar 135 LS to the model line up and with increased local sub-assembly operations, Bajaj Auto is confident that the Indonesian subsidiary will be able to reduce its losses this financial year. The Indonesian subsidiary, according to the annual report, has not broken even though its losses came down in 2009-10 over the previous year. The subsidiary reported a turnover of Rs 88 crore last year with net loss amounting to Rs 12 crore. The accumulated losses totalled Rs 80 crore.

PT Bajaj Auto Indonesia was incorporated in 2006-07 with an issued and subscribed capital of $ 12.5 million (Rs 56 crore). During 2009-10, Bajaj Auto infused $17 million, increasing its total stake to 98.9 per cent.

According to the annual report, Bajaj Auto has increased its holding in KTM Power Sports AG of Austria, Europe's second large sports motorcycle manufacturer, to 35.67 per cent at a total investment of Euro 140.03 million (about Rs 850 crore). The company bought a 24.45 per cent stake for €98.36 million in KTM in 2007-08 through its wholly-owned Netherlands-based subsidiary Bajaj Auto International Holdings BV. It subsequently increased its stake in KTM and during 2009-10, had increased its holding to 31.92 per cent. In April, Bajaj invested a further Euro 20.16 million to increase its holding in KTM to 35.67 per cent.

The first product developed under the joint development programme between KTM and Bajaj Auto was showcased at the Milan Motorshow in November 2009. The product will go on sale in 2010-11.

Bajaj Auto has said that it plans to increase its capacity of two- and three-wheelers from 4.26 million now to 4.98 million by March 31, 2011.