Bajaj Auto is trying to challenge Hero Honda's dominance in executive segment of motorcycles through launch of new bikes in the segment. The executive segment remains the largest category accounting for over 60% of total motorcycles and it is dominated by Hero Honda (HHML).

Bajaj has only very low market share in the executive segment where it has only 10% share. It is now planning to augment it presense in segment through the launch of 'K60'. The new model will come with the DTSi technology which the company introduced in Pulsar twins.

This would be Bajaj's third attempt at the executive segment after the lukewarm response to Caliber 115 and Wind 125 in FY04. Even though BAL has proved its superior product development capabilities in the past, many analysts feel that making an inroad into Hero Honda's stronghold will be a tough task. Also Hero Honda is expected to strengthen its product portfolio in the executive segment through proposed new launches in the second half of 05. Market share for FY04 remained unchanged at the previous year's level of 24%, as gains in the premium segment were offset by a decline in the economy segment.

Bajaj Auto will also be launching a new model, CT100, in the economy segment positioned against HHML's CD Dawn. The success of these launches would be critical for BAL to get near the 100,000 per month mark in motorcycles.

It is expected that there will be a 16% volume growth in motorcycles and 14.2% growth in total two-wheeler volumes for BAL in FY05. Bajaj Auto is also focussing on exports. Bajaj Auto is the only two-wheeler company which has a significant contribution from exports.

Motorcycle exports registered a growth of 81% during FY04 and the share in total volumes increased to 7.8% in FY04 from 5% a year ago. BAL has targeted 35-40% growth in exports for FY05 with ASEAN region and South America being the key export markets. It also intends to follow a mixed strategy of selling CKDs and setting up assembly units in select markets.

For example, BAL is planning to set up an assembly unit in Indonesia for three-wheelers initially and two-wheelers eventually. Indonesia is the third largest two-wheeler market after China and India with annual sales of 3.2 million vehicles. A meaningful presence in the exports market would provide critical volumes and enable Bajaj to weather intense competitive pressures in the domestic market. BAL remains the most diversified play in two-wheeler industry, both in terms of products and geography, with a cash cow in three-wheeler segment.

Three-wheeler volumes continued to surge on the back of exports, which now account for 29% of total volumes for BAL. More importantly, 71% of the incremental volume in FY04 was from exports. Threewheeler sales rose 26% over the last quarter and 18.3% during the year.

Net sales reached a record level of Rs 49.2bn for FY04 up 14.2%. The treasury income propped up the compay's bottom line. A significant cash surplus and buoyant equity and debt markets during FY04, helped double BAL's other income to Rs 2.8 billion.