According to Economic times India’s second largest two-wheeler maker Bajaj Auto is going to increase its two wheeler prices by up to Rs. 1,000 with effect from January 1, 2011. The reason is same as seen in previous price hike “rising input cost’”.

According to S Sridhar Bajaj Auto President (Two Wheeler) “The continued rising cost of raw material inputs is the main cause for this increase. Despite the hike, our models continue to offer superior value compared to competition, and hence we do not expect this price rise to affect sales,”

Last week Hero Honda has announced the price hike of Rs.500 to Rs.1,500 across all the variants blaming the same reason of rising input costs.

It seems like rising input cost is hurting margins of all the two wheeler manufacture but Hero Honda and Bajaj Auto are two companies which are passing entire input cost to consumer. As Bajaj Auto works on 20% EBITA margin it raises its two wheeler prices as the raw material prices increases. Hero Honda which enjoys brand equity is also started doing the same thing.

This is the third or fourth price hike by Bajaj Auto in this year.  The strong demand for two wheelers is giving much comfort to both of companies to raise prices twice or thrice in a year. Overall from next year January the same bike from Bajaj will cost 5-7% more from what it was costing in the January 2010.

– Mahavir Kothari