Auto focus

Steering clear of scooters

Murali Gopalan | Updated on August 21, 2014 Published on August 21, 2014

Rajiv Bajaj, Managing Director, Bajaj Auto Ltd - PAUL NORONHA

Rajiv Bajaj, MD, Bajaj Auto, talks about why being a specialist manufacturer makes sense

It is a question that is constantly posed to Rajiv Bajaj when he meets the media. And each time the Managing Director of Bajaj Auto explains why he has no intention of getting into the scooter segment.

Last fortnight, he went into unusually great lengths to elaborate on the product strategy. The occasion was the launch of the all-new Discover 150, the commuter brand that has been losing market share for a while now to Hero’s formidable Splendor and Passion models, but also to Honda’s Activa. The scooter is comfortably clocking over 1.8 lakh units each month, more than twice the Discover’s numbers.

Broad horizons

Rajiv Bajaj is only too aware of this chasm in the commuter space but drives homes the point that his company’s business goes beyond India. It is already the largest exporter with over 1.3 million bikes last fiscal of which shipments to Nigeria take up half a million units. Colombia follows with two lakh units with Bangladesh and the Philippines nearly at one lakh bikes apiece.

It is quite likely that Bajaj Auto’s international business, which already accounts for 45 per cent of volumes, could grow even more rapidly in the coming years and surpass domestic numbers. The company already has a 10 per cent global share in bikes and this could get a further boost with the help of partners, KTM of Austria (in which Bajaj Auto owns 48 per cent) and Kawasaki Motor. Leveraging these alliances will cover a significant part of the ASEAN region as well as Europe, Japan, the US and Latin America.

From its MD’s point of view, this global vision can be made a reality only by staying true to the bike space and not get distracted with scooters even if this means more numbers. “Being a specialist gives us the chance to be the best in the world. During a downturn, it makes sense to make a better bike and not a scooter,” he said at the launch.

Carving a niche

This puts in perspective his reason to pursue with Brand Discover even though it has been steadily losing market share. Bajaj believes the fault lies with the company in not creating a stronger mindset on the lines of what it so successfully achieved with the Pulsar. This is why, he adds, the Discover 150 could make the difference with features such as a mono-shock suspension, petal disc brakes and tubeless tyres.

“Our job is to create categories in motorcycles,” Bajaj declares, a clear message that there is no point being a ‘me too’ player. This was the premise for the launch of the Discover brand a decade ago with the 125cc commuter, a breakaway from the traditional 100cc association. It was the right brand strategy except that a detour occurred in the form of the XCD 125 which took away the attention from the Discover.

The comeback happened with the Discover back in the saddle in 2009 which paved the way for a strong comeback in the commuter segment. Yet, the last five years have not seen a rapid ramp-up in numbers while brands like the Splendor and Passion are still going strong. Competition has also got more intense with Honda getting into the bike space too .

It is the tepid showing of the Discover which prompts critics to wonder if the company is actually goofing up by not getting into scooters. Bajaj explains why being a specialist manufacturer makes sense as motorcycles accounts for nearly 70 per cent of volumes in the Indian market and 80 per cent in value. The focused strategy has also helped Bajaj Auto become the most profitable Indian automaker with operating margins of over 20 per cent over the last five years.

Rivals acknowledge that this is a script that is working to near perfection despite the Discover’s poor showing. Yet, they are unsure if the company’s dealers would be as ecstatic especially when they see rivals having a field day with scooters. Right from Honda, Hero and TVS Motor to Yamaha, Suzuki and Mahindra, everyone is comfortably riding the scooter wave. “Bajaj dealers would love to be part of this parade too,” a two-wheeler executive says.

Singular focus

With over three million units annually, scooters are a fourth of total two-wheeler sales and continue to grow strongly. Over the next three years, their numbers could nearly double thanks to Honda alone adding 1.2 million units in its Gujarat facility which will be operational towards the second half of next fiscal.

Will this finally prompt Bajaj Auto to throw its hat into the scooter ring? Speculation is rife that it is already working on a product which could be out next year. Perhaps this is a case of too much smoke with no real fire.

Even the most strident supporter of scooters will concede that bikes will rule the roost in India through this decade. After all, they are better equipped to handle longer distances as road connectivity improves in the coming years.

For the moment, Rajiv Bajaj would rather focus on the global arena of motorcycles.

Published on August 21, 2014
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