Analysts have started discounting a price war after Bajaj Auto, in an analyst call, indicated its intention going for aggressive pricing and, if needed, compromising margins in order to dominate the market.
Shares of the two-wheeler makers have been under strong pressure ever since.
The upbeat mood of the market, fuelled by lowering of GST levies over 100 discretionary items, failed to stem the fall in the two-wheeler space.
Shares of Hero MotoCorp plunged 6.20 per cent, those of Bajaj Auto 5.35 per cent and TVS Motor Company 4.27 per cent.
The top brass at Bajaj Auto said they were targeting 15 per cent topline growth CAGR over the next two to three years, and most of this growth is expected to come from the motorcycle segment. This view was against the market perception that the company would go more for premiumisation.
Cost pressure will continue in September quarter as well, the company said in the concall. Arihant Capital in a note said the company was focusing on gaining market share, which may also be a reason why it may be prepared to give up some margins.
During June quarter, realisation of the two-wheeler maker declined 1.3 per cent YoY (-6.6 per cent QoQ) due to a higher share of entry-level two-wheelers. On the other hand, raw material cost was higher by 140 bps, largely due to an adverse product mix and commodity cost inflation.
For the Hero MotoCorp stock, Monday’s was third consecutive fall. In the last three sessions, the stock has lost nearly 10 per cent. Bajaj Auto slipped for the second session in a row and has erased nearly 14 per cent.
Indian equity market extended its winning streak to a second consecutive session on Monday, underpinned by gains in select auto, FMCG and bank stocks, including ITC, ICICI Bank and Maruti Suzuki.