New 125cc could catapult Discover as $1.5 b brand

Bajaj Auto will launch the new Discover 125 next month as part of a brand strategy to grow sales from the present 1.25 lakh motorcycles each month.

Of these, the Discover 100 accounts for 85,000 units with its 150 sibling taking up the balance 40,000 units. With the 125, Bajaj Auto is hopeful that monthly numbers could touch 1.65 lakh units halfway through 2011-12. This will translate into two million units annually, implying that Brand Discover's value in just two years, since the journey began with the 100cc bike, would be at least $1.5 billion (around Rs 7,000 crore).

But what would the Discover 125 do what its two siblings have not already achieved in terms of creating a strong presence in the mass commuter segment? Sources say this bike is part of a carefully drawn-out strategy conceived by Bajaj Auto nearly three years ago.

“The idea was to first cover both extremes of the commuter market. The Discover 100 fulfilled the aspiration of owning the brand and getting the mileage. The 150 had the power and awe-inspiring features at a killer price,” a top industry source said.

The Discover 125 is meant to meet the needs of buyers who would not opt for a Bajaj in the 100cc space and would much rather settle for a Hero Honda bike. “And as incredulous as it may sound, a significant section of customers are actually intimidated by the more powerful Discover 150. To them, powerful bikes mean low mileage and high maintenance costs,” the source said.

Two versions

The 125cc option is, therefore, intended to give these buyers the best of both worlds. It will have two versions priced at around Rs 44,000 (drum brakes) and Rs 47,000 (with disc brakes) each. Interestingly, the Discover 150 with disc brakes is marginally dearer at Rs 48,000 but Bajaj Auto's market feedback shows that even this would not tempt the 125cc customer. “It possibly has to do with a certain gumption and chutzpah which is part of the 150cc rider's DNA,” a source said.

However, the converse may not hold true for the Discover 100, priced at Rs 43,000, and Bajaj expects a larger customer shift to the 125cc version. This is something that the company is prepared for and would actually welcome the possibility of 50 per cent (or more) of its 100cc base moving to the Discover 125.

“This also has to do with the fact that Hero Honda, with its Splendor and Passion motorcycles, is still top-of-recall for the 100cc market. The Discover brand strategy could catapult Bajaj to a similar position in the 125cc space where there is no big brand right now,” the source said.

From Bajaj Auto's point of view, the success of the Discover vindicates it brand strategy where the Pulsar is the other important player. Since the time the Discover 100 was launched in July 2009, followed by the 150 in April the following year, numbers have been growing by the month. “More importantly, this has been a profitable strategy which explains why Bajaj has constantly posted EBITDA of over 20 per cent every quarter,” the source added.