Bajaj hits the bull’s-eye with its ‘invading the middle’ strategy

With two days to go before the current fiscal draws to a close, Rajiv Bajaj will have reasons to feel pleased. His company has displayed a remarkable resurgence in motorcycles where the centre of gravity within the industry has now shifted quickly to the entry segment.

As the Managing Director of Bajaj Auto says, this is clearly due to the CT 100 and Platina blitzkrieg that has intensified pressure on the executive commuter category dominated by Hero MotoCorp.

Of course, Hero has its own HF range that leads the entry segment but there is really little doubt that Bajaj Auto’s CT 100 and Platina combine have redefined the dynamics here. After all, it was this very product space that was languishing at 18 per cent of the overall motorcycle market three years, down from a dominating 39 per cent in 2006.

Comeback king

The entry segment has now staged an astonishing comeback and its share last year stood at 35 per cent. As Bajaj says, this kind of a segment shift (from the executive commuter) is unheard of.

Sure, there is no question that price played a big role in drawing buyers to the entry space but, from the company’s point of view, it could afford to do so in order to build market share.

After all, the more profitable Pulsar has been growing year-on-year and drawn customers largely from the 125 cc space. As a result, the pricier sports segment has grown from 18 to 25 per cent of the motorcycle segment in just one year. “Our strategy of ‘invading the middle’ is paying off and has contributed to volumes and profitability,” says Bajaj. In the process, the mid/executive commuter segment, in which the Splendor has been the monarch for decades, has clearly shrunk.

“When skating on thin ice, your safety is in your speed.. thus we moved at lighting speed since March last year and have outpaced the industry,” adds Bajaj. The company now intends to keep up the pressure and the first quarter of next fiscal will see three new products — CT, Platina and Pulsar — which will take the growth story forward.

“We believe the entry bike segment will grow to 40 per cent and the sports to 35 per cent,” says Bajaj. If things go according to plan, he is confident that Bajaj Auto’s share in domestic motorcycles will also grow from the present 20-odd per cent to 25-30 per cent. “We did well as we played to our strengths... our strong brands in the entry and sports segments,” says Bajaj. “We did so because gaining intra-segment share is always easy but often unsustainable.. when you gain inter-segment share, as we have with CT 100, Platina and Pulsar invading the middle, such gain is much harder for competition to negate.”

Focus remains

It is also evident that Bajaj Auto has pretty much decided to keep its focus confined to these three brands, which are clearly its biggest growth engines. The Platina is also gradually climbing the ladder as a value proposition while the more affordable CT 100 is playing out its part to perfection in the entry space.

The Pulsar, of course, has been the company’s flagship brand for 18 years now with the Avenger and Dominar 400 complementing the premium range. With the focus on the entry and sports segments now paying off rich dividends, Bajaj believes it is important to build on this momentum. Does this mean that brands like Discover and ‘V’ will now be relegated to the sidelines? From his point of view, it makes sense to take one thing at a time. For now, it clearly makes sense to prioritise the CT100, Platina and Pulsar but when the time comes, there will be reason to revisit brands like ‘V’ and build on their potential. It will be interesting to see how the imminent motorcycle tug-of-war pans out in the coming months. Hero will doubtless be keen to retain its leadership position with Splendor and will pull out all the stops to ensure that this objective is achieved.

It is still the leading player in the overall two-wheeler arena even while erstwhile partner, Honda, has emerged its fiercest rival with its Activa scooter. Bajaj has, of course, chosen to focus on motorcycles while steering clear of scooters where it was once the undisputed monarch. The company has attempted to upset the Hero applecart over the years with differentiated products like Discover and ‘V’ in the executive commuter space. Yet, Splendor has comfortably lasted all these years even after Hero parted ways with Honda.

Growth to continue?

Bajaj is clearly betting big on the new strategy for the entry and sports segment, which has worked like a charm thus far. Bajaj is quite confident that the growth story will continue through this fiscal, which means the dynamics in the executive commuter space could change if it were to come under more pressure.

What would this mean for Splendor? Will it manage to weather the storm or will Hero come out tops as it generally has? These are interesting times for the two-wheeler industry which is up against a host of challenges in the form of new safety norms that come into effect from April 1 and Bharat Stage VI emission norms due to be mandatory a year from now.

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