Bajaj Auto plans production cuts amid demonetization in Nigeria!

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Bajaj Auto plans production cuts amid demonetization in Nigeria!
Demonetization in Nigeria!!!
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Bajaj Auto has always tried to derisk itself from regional turmoil thanks to its global exposure, which makes up for almost half of its sales

In January, the company’s total vehicle sales fell 21% to 2.8 lakh units, due to weaker export sales

The company sold 140,428 two-wheelers in the domestic market (up 16% YoY), while exports came at 100,679 units (down 47%).

On the exports front, the performance has been deteriorating over the past couple of months. It was in June 2022, the exports in FY2023 peaked at 190,865 units, to the lowest in the month of January.

In the three-wheeler segment, Exports however declined by 40 percent YoY

Bajaj Auto plans to cut down on production in the two-wheeler and three-wheeler segments by up to 25 percent at its export-focussed plants

The decision is triggered by uncertainties in Nigeria, which is the company's biggest market

According to the report, Bajaj Auto is expected to manufacture approximately 250,000-270,000 units in March, which is significantly lower than its average production of 338,000 units during the initial nine months of FY23.

The situation may lead to a decline in the overall capacity utilisation rate at Bajaj Auto plants to below 50 percent. The company has an installed capacity of 550,000 units every month.

Nigeria, Africa’s most populous nation, had decided last year to start circulating newly designed 200, 500 and 1,000 naira notes, originally giving people until January 31 to get rid of their their old currency notes (However, the deadline to swap notes was extended to February 20 due to the unavailability of new notes)

The bank said it wanted to reduce the amount of cash in circulation in order to better control liquidity, curb inflation and move towards a cashless economy.

Analysts believe that exports are likely to remain under pressure in the near term, owing to weak macros, adverse currency movements and dollar availability issues in Africa, South Asia and Latin America regions.

Meanwhile, driven by a healthy uptick in urban markets, coupled with the marriage season in northern regions (20-25 per cent of total demand in key states such as UP and Bihar), 2W demand has slightly improved in February, 2023

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