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.