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Mr Rajiv Bajaj, President, Bajaj Auto Ltd, at the launch of the Bajaj Caliber 115 motorbike at the factory at Akrudi, Pune.

PUNE, March 5

BAJAJ Auto Ltd (BAL) and its technical collaborator , Kawasaki of Japan, are exploring the possibility of sharing equity investment in motorcycle manufacturing.

While earlier speculation had it that Kawasaki may take equity in BAL with the latter picking up a counter equity stake in one of Kawasaki's overseas plants, Mr Rajiv Bajaj, President, BAL, said there was greater likelihood of the two parties co-investing in operations abroad. He cited Indonesia as one such location.

The earlier idea of cross holding was discounted since the strengths of the two companies are in different segments and product categories vary considerably. BAL has expertise in small motorcycles and Kawasaki has the desire to gain presence in that segment, making shared investment in a new facility a better option. A Kawasaki team is expected in Pune on March 11 for discussions on the subject.

Interestingly, Mr Bajaj said that spinning off BAL's motorcycle operations into a separate company wherein Kawasaki can take equity, continues to be another option under study. The two companies have been coming together of late, on a shared desire to develop and manufacture small bikes (sub-250cc) for the global market, the proposed April launch of a 125cc `global bike' being the first major step in that direction.

"What is unique about Bajaj-Kawasaki is that the two companies don't have overlapping product interests,'' he said, pointing out alongside that it differed in the case of competitors. He was speaking at a press preview of the Caliber 115, positioned in the executive segment of the domestic motorcycle market, riding which BAL hopes to shortly double and eventually have a 25 per cent market share in that category.

For BAL, the arrival of the Caliber 115 could mean slow phasing out of the earlier Caliber and Caliber Chroma. At 54 per cent of the total motorcycle market, the executive segment is its biggest category featuring models like Caliber from BAL, Splendour and Passion from Hero Honda, Victor from TVS and Freedom from LML.

BAL's current market share here is seven per cent. The Caliber 115 which has class leading horse-power, torque and mileage is priced at Rs 40,348 (ex-showroom, Pune), marginally lower than the Passion and Victor. Against its small market share in the executive segment, BAL has 45 per cent share in the entry motorcycle segment and 40 per cent in the premium segment. "For leadership in motorcycles, gaining leadership in the executive segment is critical,'' Mr R.L. Ravichandran, Vice-President (Business Development & Marketing), BAL, said.

During February-March this year, amidst the ongoing cricket World Cup, BAL has set aside Rs 15 crore to promote the Caliber 115.

According to him, the motorcycle market should grow at around 20 per cent in 2003-2004, its track record over the last few years having averaged 16-17 per cent.

Given the still low market penetration of motorcycles, growing urbanisation, rising ease of ownership and GDP growth trends, any market growth estimate in motorcycles cannot be below 15 per cent for the next five years.

Geared scooters which have lagged behind due to a perceived lack of product excitement, as compared to motorcycles, will take another two years of development work to be revitalised, Mr Ravichandran said. BAL is looking at overall sale of 1.5 million 2&3-wheelers in 2002-2003. Of that, motorcycles should be close to 90,000 units.

Target for next year is 1.2 million motorcycles and a domestic market share of 27-28 per cent, Mr Bajaj said. 2002-2003 exports are estimated at 90,000 units with export value aggregating to Rs 300-350 crore. In January, BAL opened its first overseas office - at Dubai - for handling the Middle East and African markets. Also of interest to BAL, are the Indonesian and South American markets.

Besides the 125cc Kawasaki global bike, BAL has slated for introduction next fiscal, a new engine technology in the below 250cc category (to be introduced on one bike first) and new high volume `Bajaj' motorcycle.

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