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Nano effect: 3-wheelers to be cheaper?

By Danny Goodman in New Delhi
Last updated on: March 31, 2009 10:01 IST
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Bajaj Auto, the country's largest three-wheeler passenger vehicles manufacturer, said it had enough leeway to reduce the price of its popular autorickshaws to counter any shift by its consumers to Tata Motors' Nano.

While the Nano is priced at Rs 1.12 lakh (Rs 112,000, ex-showroom Pantnagar), Bajaj Auto's RE petrol variant costs about Rs 90,000, while its diesel variant is pegged at Rs 1.2 lakh (Rs 120,000 ex-showroom).

"There's enough room in our profit margins to lower the prices of our three-wheelers in the future," said Sanjiv Bajaj, executive director of Bajaj Auto, on the sidelines of the CII National Conference last week. He was responding to a question on the impact of the Nano's entry on the autorickshaw market.

The Nano's base price tag of Rs 1 lakh (Rs 100,000) for the basic model is, says Tata Motors, applicable for only the first 100,000 units.

Industry experts, including Maruti Suzuki chairman R C Bhargava, have said three-wheeler customers will increasingly shift to the Nano as an alternative mode of transport which is safer and more comfortable than autorickshaws.

Bhargava has said that is primarily because the Nano is priced at about the same level of a three-wheeler.

Analysts also say Bajaj can drop prices without any problem. "Bajaj Auto has been in the three-wheeler segment for 60 years. Which means their plants are fully depreciated and they can afford to lower the prices, which other manufacturers can't do," says a top executive from a competing three-wheeler brand.

"The highest margins derived by Bajaj Auto comes from its three wheeler segment," says Vaishali Jajoo, auto analyst at Angel Broking.

In the three-wheeler segment, comprising both passenger and goods vehicles, the former is 76 per cent. Of this, Bajaj Auto enjoys a 46 per cent market share, Piaggio Vehicles has 38 per cent and Mahindra, 10 per cent.

Broadly, the passenger vehicle segment is divided into two categories, three-seaters and six-seaters. Three-wheeler executives say the introduction of multi-purpose vehicles like Tata Motor's Ace Magic has already dented sales of autorickshaws at the top end of six-seaters used in suburban areas and priced around Rs 1.8 lakh (Rs 180,000) each.

The segment is currently dominated by Piaggio, Bajaj and Mahindra. The same, they think, could happen to the popular three-seaters that constitute the bulk of sales in this segment.

However, Bajaj says there won't be a major shift to the Nano from autorickshaw owners. "If you take issues like operating cost and mileage per km, a three-wheeler wins. Operating costs matter to the owner in this segment," says Bajaj.

"A large number of the three-wheelers are used in rural areas. Much can't be said about the Nano's performance on rugged roads at this stage. Further, there's the issue of obtaining a travel permit to run the Nano as a public carrier," said another executive.

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Danny Goodman in New Delhi
Source: source

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