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Can Bajaj Auto ride out the auto sales slump on e-Chetak?

While unveiling the Chetak e-scooter, it said the price would be less than Rs 1.5 lakh.

, ETMarkets.com|
Updated: Oct 18, 2019, 04.39 PM IST
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Bajaj Auto ventured into the electric vehicles segment by reviving the iconic Chetak after 14 years. This is also the first time a mainstream automaker has come out with an electric scooter.

However, analysts believe the new launch may not help the auto maker grow sales in the near term. Cut-throat competition, relatively higher price and lack of supporting infrastructure may play spoilsport for the company. But, it will certainly have a first-mover advantage in the long run, they said.

Bajaj’s foray “will definitely keep the space exciting, but it’s very difficult to say if it can revive auto sales in the near term. For the long term, yes, that is what Bajaj is looking at, to be ready whenever sales of electric vehicles pick up,” said Siddharth Khemka, VP and Head of Research (Retail) at Motilal Oswal Financial Services.

Rajiv Bajaj, Managing Director of Bajaj Auto, said he wanted the first-mover advantage. While unveiling the Chetak e-scooter, the company said the price would be less than Rs 1.5 lakh.

Khemka said the pricing, around Rs 1.5 lakh, will be a bummer, as it will be twice the cost of petrol scooters. “It is a niche market. The question is, are buyers really interested apart from a few people who are really looking at either costs of operations or environment? Is the young crowd, which is riding motorbikes, willing to compromise on speed?” he asked.

Amit Jeswani of Stallion Asset Management also is not too excited. He thinks the EV industry is in a very nascent stage. Pricing and lack of charging points could pose challenges for scooter sales.

“Though Bajaj Auto is a good company, at this stage if an investor bets on the stock thinking of electric push, the outcome could be shocking,” he said.

Competition from smaller players like Ather Energy, in which Hero MotoCorp has a stake, and Greaves Cotton could also pose challenges to Bajaj. But, in the long run, Bajaj could have an advantage over them.

“Most of the smaller companies are not really manufacturers. They either assemble or import it. They lack national presence, either in terms of sales or service centres, which is where Bajaj will have an edge. If you have an all-India setup, then you don’t have to set up a new system. You can use your existing network,” Khemka said.

“Moreover, as a consumer, if you ask me that there is a startup or a Chinese company and Bajaj Auto, I will have my peace of mind with Bajaj Auto. Because, if tomorrow, the startup closes, how will I get my services done?” he said.

Khemka thinks a government push can help EV sales, especially in cities like Pune, and Bajaj could be a beneficiary. But for that to happen, a charging support network would be necessary.

Also Read

Buy Bajaj Auto, target Rs 3.250: Kunal Bothra

Buy Bajaj Auto, target price Rs 3,420: Shrikant Chouhan

Jefferies has underperform on Bajaj Auto, target price Rs 2,650

Analyst Calls: Bajaj Auto, Mindtree, Lupin, DB Corp

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