Not ready to be bogged down by competitive pressures despite strain on margins, Bajaj Auto has said it was ready to meet any kind of price war "head-on" and could even afford a further reduction in prices.
"If the situation demands, of course...But we will not start a price war," said Rahul Bajaj, chairman of Bajaj Auto when asked if the company could go in for further reduction in prices. "If somebody starts a price war, we will not back out...We will meet it head-on, forever," Bajaj added.
Most of the companies in the motorcycle segment, including market leader Hero Honda and the second-largest Bajaj Auto, have seen margins under pressure due to a variety of factors, which includes continued higher price of inputs as well as lower realisations due to frequent price cuts and discounts.
For Bajaj Auto, the situation looks even more acute as a majority of the sales of the company, more than 60 per cent, were in the lower-end segment where it sells the popular 'CT 100' model.
Even as he admitted that margins "will remain under pressure", Bajaj said it was not much of a concern for the company. "Why should margins worry anybody except the stock market investor. As far as we know, we are doing around 14-15 per cent," he said, adding that the company was comfortable in the current position.
"When it is between 10 - 20 per cent and Bajaj Auto has cash reserves of over Rs 5,000 crore (Rs 50 billion), how will it make any difference on the margins," Bajaj pointed