Bajaj plans RI plant as rivals gain in India

Bajaj plans RI plant as rivals gain in India

Bloomberg, Pune, India

Bajaj Auto Ltd., India's No. 2 motorcycle maker, plans to set
up an assembly plant in Indonesia next year, aiming to boost its
overseas sales as competition from rivals such as Honda Motor Co.
increases at home.

"It's the first step in a larger direction," Sanjiv Bajaj,
vice president in charge of finance at Bajaj, said in an
interview in Pune, India.

Bajaj Auto will next month start talks with PT Abdi Raharja,
its distributor in Indonesia, about buying one of its units as a
way of entering the Indonesian motorcycle market, the world's
third-biggest, he said.

Bajaj -- which this month raised its export target by a 10th
-- plans to sell more motorcycles and three-wheeled vehicles,
locally known as auto rickshaws, in Asia and Latin America. It
aims to export 20 percent of its production by the end of the
decade, Chairman Rahul Bajaj said in an interview last month.
Exports account for about 6 percent of its total sales.

"Expanding overseas may be difficult for Indian companies
without an alliance," said Srividhya Rajesh, who helps manage
the equivalent of $19 million of stocks, including some of Bajaj
Auto, at Sundaram Newton Asset Management Co. in Chennai,
India.

Bajaj may benefit from extending its alliance with Japan's
Kawasaki Heavy Industries Ltd., Rajesh added. Kawasaki provides
technology to the Indian company for making some motorcycles such
as Caliber115 and Wind125.

Bajaj, TVS Motor Co. and other Indian automakers want to set
up factories abroad and boost exports to compete with Honda and
Yamaha Motor Co., the world's biggest motorcycle makers, which
have expanded into India in the past two decades. They aim to
produce motorcycles with engines smaller than 250 cc at lower
prices than their Japanese rivals.

Hero Honda Motors Ltd., India's biggest motorcycle maker and
26 percent owned by Japan's Honda Motor Co., increased market
share in India's motorcycle market to 46.6 percent in the eight
months to Nov. 30 from 45.3 percent a year earlier, according to
the Society of Indian Automobile Manufacturers. Bajaj's market
share remained unchanged at 23.7 percent.

Also, Bajaj this year lost its leadership in the local
scooter market to Honda Motorcycle & Scooter India Pvt., the
Japanese maker's other Indian subsidiary. Bajaj's share fell to
26 percent this year from 41 percent last year. Honda increased
its share to 32 percent from 15 percent last year, according to
the grouping of all vehicle makers.

Bajaj Auto plans to export vehicle kits from India for
assembly and sale in Indonesia, Sanjiv Bajaj said. That's more
cost-effective than shipping completed vehicles from India, which
attract higher import duty in Indonesia.

The company earlier this month raised its export target by a
10th to 150,000 vehicles for the year ending March 31. It sold
94,241 vehicles in the year ended March 31.

Shares in Bajaj Auto have more than doubled this year
against a 67 percent gain in the benchmark index. They fell as
much as 2.6 percent during the day and closed little changed in
Mumbai at 1,149.75 rupees.

The company will also jointly export motorcycles with
Kawasaki Heavy to the Philippines starting this month, Sanjiv
Bajaj said.