The head of two-wheeler giant Bajaj Auto is staking all on a rugged rural bike, a 600-cc super bike for export and a more elegant and comfortable auto rickshaw
Ask Rajiv Bajaj what is keeping him busy nowadays and he will talk of his three pet projects. The managing director of two-wheeler giant Bajaj Auto Ltd (BAL) has recently thrown down a challenge to his research and development unit, to build a “Bharat Bike” with a 150-cc engine, which will cost Rs 40,000 and run on rugged rural roads. Bajaj is currently king in the 150-cc bike segment, but the bike costs over Rs 50,000 (Discover), while the popular Pulsar is available for Rs 60,000.
“What I want is a tractor on a two-wheeler that can take two or three riders and the extra load of products on it, or simply a 150-cc bike at the cost of a 100-cc one,” says Bajaj, elaborating on his strategy.
That is not the only challenge that he has put up for his team. He also wants to sell sub-600-cc bikes that are made in India, leveraging Bajaj’s lower cost as an OEM supplier to the KTM brand in hitherto untapped new global markets like the US, Latin America and, may be, even Australia. Bajaj has already picked up a 40 per cent stake in the European sports bike maker, which is known for its 600-cc-plus heavy bikes. “There is a large market for our bikes in newer untapped markets,” says Bajaj.
And if that isn’t enough, he is also working on a new auto rickshaw model that promises to look better and be more comfortable than the existing range.
Underlying these projects is a common theme: BAL is looking at creating new markets where it can take a leadership position or ensure that it maintains its leadership, either through a new category in bikes or by entering new countries through KTM, or by launching a new revamped product (such as auto rickshaws, where the company wants to maintain its dominance).
Analysts say the strategy for a new Bharat bike emanates from the fact that competitors like Hero Honda have made a big dent in the rural market, which comprises over 45 per cent of their sales (up from 42 per cent last year), thanks to in-depth distribution, mostly of 100-cc bikes. BAL needs to attack rivals here to create a new category to grab the market. Also, market penetration of two-wheelers is only 10 per cent in rural India, so there is a large upside.
Moreover, Hero Honda is now concentrating on the premium segment (125 cc and 150 cc), challenging BAL’s pre-eminent position in this segment. So, BAL needs a product that can entice Hero Honda's 100-cc market, on which it has a stranglehold. After all, it has a 67 per cent share of the 100-125-cc market.
Bajaj says that the current 100 cc bikes (Hero Honda sells them in large numbers in rural markets) are not good enough for rural roads and the kind of loads they have to carry. BAL had the option of coming out with a 100-cc bike costing less than Rs 40,000 (maybe Rs 30,000) and building a new market, Bajaj says, but argues that this would not have offered buyers any value preposition.
The challenge is to create a new category and provide value for the customer. So how will BAL cut the cost of its new bike by Rs 10,000? Well, it is working on various alternatives. For instance, the bike will not have a digital console or LED systems, which come at a cost. Engineers who are working on the bike have promised that it will provide at least 50 per cent more torque than a normal 100-cc bike. That would also mean losing out on mileage, but the idea is to give more torque and lose only 10 per cent in terms of mileage when compared to a 100-cc bike. The company hopes consumers will be ready to make this small compromise.
Bajaj has not assessed what exactly the size of the market will be, as the product is slated to be launched sometime in the second quarter of this year. But he says that as many as 400,000 bikes are sold in the country every month in the 100-cc segment, and the game plan is to get as many consumers as possible to buy the new bike with a higher engine capacity.
The new bike is just one part of the story. BAL exports about 30 per cent of the bikes it produces, but wants to enter new untapped markets where Bajaj is well aware that the company’s name will not sell. That is where his acquisition of a 40 per cent stake in KTM will help. The European bike maker sells only 70,000 super bikes every year – the second-highest after Harley Davidson, which sells 200,000, while Ducati sells 35,000. But KTM needs to increase its volumes and BAL can sell the bikes as an OEM; the cost of manufacturing in India would be much cheaper. “The idea is that in five to 10 years KTM will buy more bikes from India than it now sells around the globe,” says Bajaj.
A beginning has already been made with the Duke 125, which KTM is selling across various markets. The product has been developed and manufactured in BAL’s Chakan plant in Maharasthra. Bajaj says his company’s products could be sold as KTM bikes in new markets of Europe, the US, Australia and Brazil, where they have just entered.
Bajaj’s third pet project is to rebuild three-wheelers once again. After all, there are over five million Bajaj Auto scooters on the road and, with high levels of pollution, they are not green. Bajaj hopes that he will be able to replace them with a new product. The new product, which is on the drawing board, will be more spacious, larger, more comfortable and much more fuel efficient than the current range of three-wheelers, which gives 25-30 km a litre.
To achieve his objective, Bajaj hopes to modify the same platform that it is building for the proposed Renault-Nissan car project. He says the car project is just the icing on the cake and BAL is building this platform in any case to make four-wheeler products and to manufacture a new scooter for Indian as well as global markets (50 per cent of the scooters are exported). The new product will be more expensive, but Bajaj hopes to undertake a balancing act. It is working on a price that would be 15-20 per cent higher than the average Rs 1.1 lakh that customers fork out for a scooter.
Surely, no one will mind that. Bajaj has taken on some ambitious projects which could well determine its future. The question is whether he will be able to pull off this gamble.