Bajaj to export less vehicles to Sri Lanka as import duty rises

Bajaj Auto Ltd, the country’s largest exporter of two- and three-wheelers, will ship fewer vehicles to Sri Lanka this year after the island state’s government sharply increased import duties. The Pune-based company will pare its overall exports to Sri Lanka by about 60,000 units this fiscal year, chief financial officer Kevin D’sa told analysts in a conference call on Friday. The company’s average annual sales to Sri Lanka are 264,000 units. Bajaj exports 10,000 motorcycles and 12,000 three-wheelers to Sri Lanka every month. The country accounts for 17-18% of its total exports. “Sri Lanka is going to be a pressure point for two to three months,” said D’sa, adding that over a period of time buyers will get used to the new price. The sales will only get deferred and not lost, he said, as the buyers in that market do not have much choice but to cope with the increased price. Prices of Bajaj’s motorcycles and three-wheelers have shot up by 29% and 32%, respectively, in Sri Lanka after the import duty hike. To contain its rising fiscal deficit, the Sri Lankan government increased the import duties on cars from 120-291% to 200-350%, on three-wheelers from 51-61% to 100%, and on two-wheelers from 61% to 100%, Mint reported on 3 April. Duties on buses, trucks and tractors remain unchanged. Sri Lanka is an important export market for several Indian auto makers, including Maruti Suzuki India Ltd, the country’s biggest car maker. Exports account for 36% of Bajaj’s total production. In the fiscal year ended 31 March, Bajaj sold more than 1.5 million two-wheelers and commercial vehicles. Some of the company’s other key export markets are Africa, the Philippines and Latin America. D’sa said he expects Africa, the company’s biggest market, to contribute 45-47% of the total volumes. Bajaj also plans to commence exports to Argentina in six months. Analysts are not worried about the volume contraction in Sri Lanka. “The price increase will get absorbed and sales will bounce back in a year or so,” said Mahantesh Sabarad, senior vice-president (equity) at Fortune Equity Brokers Ltd. Bajaj’s fourth-quarter profit dropped 45% to Rs.772 crore because a one-time gain had boosted year-earlier earnings, it said on Thursday. Excluding such items, profit after tax rose 12% to Rs.759 crore. The company had reported a one-time gain of Rs.826 crore in the three months ended 31 March 2011 because of a benefit it received from the Maharashtra government for paying sales tax in advance. Bajaj’s shares ended 2.63% lower at Rs.1,532.95 on BSE on Friday, while the Sensex fell 0.5% to 16,152.75 points.