Bajaj Auto Ready To Trigger Price War — A Train Of Consequences

Bajaj Auto has announced that the company could possibly dump old BS-IV stocks in the market, triggering an 'unwarranted price war' during the transition to Bharat Stage VI (BS-VI) emission norms from April next year. They also called the transition a "joker in the pack".

In its Annual Report for 2018-19, the Pune based company said that while its motorcycles, three-wheelers and quadricycles would be BS-VI compliant a few months before the 1 April 2020 deadline, it would be difficult to anticipate the state of BS VI readiness of their competitors.

Bajaj Auto wrote to its shareholders, "For the industry as a whole, we believe that the joker in the pack will be the tough Bharat Stage VI, or BS VI, emission norms that will come into play from 1 April 2020."

"However, it is difficult to anticipate the state of BS VI readiness of our competitors. If some, or most, of them have a large stock of unsold BS-IV vehicles in the second half of FY2020, they will perforce have to dump these in the market before the advent of April 1, 2020," they added.

They also said, "That could trigger an unwarranted price war, to the detriment of all. We cannot claim that such a scenario will definitely play out; equally we cannot ignore a distinct risk overhang on that account."

Bajaj Auto also stated that the domestic market will get more competitive across the various segments and that the days when a manufacturer could claim quasi-monopolistic presence in one or more segment is rapidly coming to an end.

The highlight of their statement, however, was, "Armed with a surplus of over Rs 16,000 crore, we at Bajaj Auto have the strength to deal with such competition."

The company told its shareholders that a majority of its strength lied in its success in exports, where markets are more diverse, and less prone to acute competitive pressures than the domestic market.

"Our strength also lies in the primacy that we have in the three-wheelers and commercial vehicles segment. Therefore, so long as we have new and exciting models on offer, we can meet the competition and succeed," it said, adding the near future, therefore, should be healthy for Bajaj Auto.

"So long as there are not too many major market disruptions on account of BS VI. Time will tell which way things move," the company added.

Thoughts About Bajaj Dumping Old Stock During The Transition To BS-VI

This was expected to be honest. Manufacturers obviously have a stock pile of all their best selling models, and they have no other way to get rid of it. We expect heavy discounts on models featuring BS-IV engines, and that will be across the industry. How much they slash prices and what discounts they offer are less than a couple of months away, we reckon.