Maharashtra scrapped permit requirements in cities like Mumbai, Thane, Pune, Nagpur, Nashik, Aurangabad and Solapur for three-wheelers
After the governments of Maharashtra and other states scrapped permits required to own and run passenger three-wheelers (also called autorickshaw) last year, Bajaj Auto has emerged as the single-largest beneficiary of the move.
Bajaj has a lion’s share of the domestic passenger three-wheeler market followed by Piaggio Vehicles. Maharashtra scrapped permit requirements in cities like Mumbai, Thane, Pune, Nagpur, Nashik, Aurangabad and Solapur for three-wheelers.
The Pune-based company’s passenger three-wheeler sales jumped 45 percent last year to 3.46 lakh units as against 2.39 lakh units clocked in 2016-17. The industry during last year grew 29 percent to 5.17 lakh units as compared to 4.02 lakh units, as per data supplied by the Society of Indian Automobile Manufacturers.
Demand for three-wheelers is expected to remain upbeat for Bajaj Auto given that pent up demand will come to the market in cities in addition to Mumbai as well as opening up of new permits in other states.
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Speaking to analysts, Kevin D’Sa, President (Finance) Bajaj Auto said, “This is a very healthy momentum that we are seeing in 3-wheelers, which was primarily driven by the Maharashtra permits, primarily Mumbai permits. But the rest of Maharashtra has still got a lot of momentum left, and therefore, I would also say that we are seeing new permits coming out in the state of Telangana, Delhi, Karnataka. And therefore, the pipeline as far as permits are concerned is reasonably healthy.”
Bajaj improved its market share to 67 percent (in 2017-18) from 60 percent (in 2016-17) in the passenger three wheeler segment. Before Maharashtra ended the permit rule and before other states released new permits industry-wide three-wheeler sales had dipped by 9 percent in 2016-17 compared to 2015-16.
Bajaj has got limited room for expansion of the three-wheeler capacity. Along with exports and cargo carrying models Bajaj has a capacity to produce 7.2 lakh three wheelers per annum. The company can increase production by just 12.5 percent this year as last year it 6.4 lakh units of three-wheelers.
“As far as capacity expansion is concerned, it's not something that we require six months (to erect). It is something where we can get the capacities up in about three months' time”, added D’Sa.
However, D’Sa also mentioned that three-wheelers can be made at the production line that makes Qute (quadricycle sold outside India) which has a capacity of 60,000 units per annum.
“I would also like to share that our growth is coming also from the diesel segment. For example, in the diesel segment itself, overall now we are having a market share of 34 percent. And I don't see any reason why we should not be sort of becoming the market leader by the end of the year in this segment”, added D’Sa.
The continued growth in demand for three-wheelers augurs well for Bajaj Auto as the segment generates more than 20 percent margins for it. This comes at a time when its two-wheeler sales ended last year with a fall of 1.3 percent to 1.97 million units thought the segment grew by 15 percent, as per SIAM data.