Bajaj Auto Ltd, India’s largest exporter of two- and three-wheelers, warned it expects overseas sales this fiscal year to be under pressure.
“Growth in exports for the company for the financial year 2012-13 in both motorcycles and three-wheeler segments is facing some headwinds due to international events such as substantial rise in import duty in Sri Lanka, trade restrictions imposed in Argentina, dollar trade embargo in Iran,” the company said in its latest annual report, released on Monday.
It expects the year to be challenging for the domestic commercial vehicle industry as well because of the lagging economy, high inflation and rising fuel costs.
“Given this challenging environment, managing growth with profitability and building a sustainable growth momentum will continue to be a key challenge for the forthcoming financial year,” the company said referring to its exports.
In fiscal 2012, Bajaj Auto exported about 1.58 million vehicles, an expansion of 31% over the previous year. It shipped 36% of its total production overseas. Exports contributed 32% to Bajaj’s turnover of Rs20,137 crore in 2011-12.
The Pune-based company will pare its exports to Sri Lanka by about 60,000 units this fiscal year, chief financial officer Kevin D’sa told analysts in a conference call last month.
The company’s average annual sale to Sri Lanka is 264,000 units. The country accounts for 17-18% of its total exports.
To contain its rising fiscal deficit, Sri Lanka in April 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%. Duties on buses, trucks and tractors weren’t changed.
D’sa said Sri Lanka will be a pressure point for two-three months. Prices of Bajaj’s motorcycles and three-wheelers shot up by 29% and 32%, respectively, in Sri Lanka after the import duty hike.
Bajaj’s key export destinations are Africa, Asia and West Asia. Africa accounted for 41% of its total exports last year.
“We have already factored in most of these (challenges) in our earnings estimates and don’t see it impacting the business in a major way,” said Umesh Karne, analyst at Brics Securities Ltd.
With state governments likely to limit the number of permits for three-wheelers, Karne expects volume growth in this business to remain flat for the industry.
Bajaj plans to increase its overall production capacity to 6.36 million units a year by March 2013 from 5.1 million units now, it said in the report.
The commercial launch of the company’s first four-wheeler, the RE 60, which was unveiled at the Delhi Auto Expo in January, is scheduled for the second half of 2012-13.
The RE 60, which aspires to be a successor to the autorickshaw, will be produced at the company’s Waluj plant in Maharashtra where it manufactures three-wheelers, Bajaj said. The earlier plan was to manufacture the RE 60 at its Chakan plant but the firm will now use the site to expand its two-wheeler capacity.
