India’s second largest motorcycle manufacturing company Bajaj Auto has cut its motorcycle and three wheeler prices in Sri Lanka to boost demand. The company will cut its prices by 5-14% for motorcycles depending upon the model. The company has taken this decision in response to new duty structure imposed by the govt. of Sri Lanka.
Earlier the govt. of Sri Lanka imposed duty of 60-100% on two wheelers in its budget of financial year 2012-13. The duty was imposed to reduce number of vehicles and hence by reducing its oil import bill. This will help the govt. of Sri Lanka to manage its fiscal deficit. The new duty structure has badly affected the vehicle sales in Sri Lanka. The same vehicle of Bajaj Auto is costing around 30% more than before April 2012. Bajaj Auto took the most of the hit as it’s the major exporter in Sri Lanka. The sale has gone down to the level of zero in the month of May.
Sri Lanka is a very big market for Bajaj Auto as it accounts around 5-7% of its total sales in terms of number of vehicle sold and around 7-9% in value terms. Bajaj Auto exports around 20,000 vehicles (10,000 two wheelers and 10,000 three wheelers) to Sri Lanka each month. Given this significance Bajaj Auto has cut its vehicle prices by 5-14% for two wheeler and 10% for three wheeler. The price cut will be shared between Bajaj Auto and local dealers. However, the company did not disclose the exact ratio of the same.
This is by far one of the highest price cut seen in the history of Bajaj Auto. However, the move is necessary to avoid drastic fall in sales. This will hurt company’s profitability but it will increase its sales and dominance in Sri Lankan market.