Bajaj gears up to expand global footprint in bikes

Bajaj Auto’s motorcycle business has seen three significant announcements over the last six months, which reflect its priorities.

The first came in March when the company made known that its ally of three decades, Kawasaki, would retail motorcycles on its own in the Indian market. Since 2009, it had been part of the joint Probiking drive with Bajaj Auto; but clearly the time had come for Kawasaki to branch out on its own.

Perhaps, this also had to do with the fact that its Indian partner was clearly bonding far more deeply with Austrian bike maker KTM. This 10-year-partnership had grown beyond an equity alliance to creating a global manufacturing powerhouse at Chakan near Pune. The Probiking network was also giving way to KTM dealerships.

The shift in preference was also reaffirmed by Bajaj in the press release announcing the parting of ways with Kawasaki on the retail side. “Over the last five years, KTM achieved a CAGR of 48 per cent and... going forward, Bajaj intends to focus on the KTM brand,” it stated.

Yet, Kawasaki and Bajaj maintained that they would continue to cooperate in overseas markets where the ASEAN region has been the focus area for growth. The two had come together in the 1980s when other Japanese manufacturers like Honda, Suzuki and Yamaha had also forged similar alliances with local players and heralded the motorcycle revolution in India.

After the news on Kawasaki, the second announcement followed in July where Bajaj and KTM jointly issued a statement indicating the next phase of their partnership. This would see production of Husqvarna motorcycles at the Chakan facility. KTM had acquired this Swedish brand from BMW in 2013 and the decision to shift production of select models to Bajaj Auto’s India plant was a clear tribute to its high level of manufacturing competencies.

With Husqvarna joining the KTM range at Chakan, this will see the emergence of a new global growth story while leveraging the cost-efficiencies at this facility. KTM-branded models like the Duke 390, which are produced here, are already being shipped to Europe, the US, Australia and Japan. The next array of markets will be in the ASEAN region where the Husqvarna range will also complement the motorcycle parade from Chakan.

The third big ticket news came in earlier this month when Bajaj said it was joining hands with Triumph of the UK as part of a global alliance to make mid-capacity motorcycles. Once again, Chakan would be home to this range, which is expected to roll out over the next couple of years.

Triumph is obviously keen to grow its presence in a slew of emerging markets where the challenge is to strike the balance between costs and quality. This is where Bajaj’s track record with KTM at Chakan is there for all to see and the alliance with Triumph, therefore, makes perfect business sense.

For the moment, there is no equity involved though there is no telling what will happen once the production momentum is in place and the partners gradually become more comfortable working with each other. While equity is not a necessary prerequisite for commitment to a business model, it still signals a stronger intent to sticking together for the long haul.

What is especially interesting is how Bajaj is going to balance a portfolio of brands in its motorcycle business as it pushes the envelope in seeking a larger global role. Right from Kawasaki and KTM to Husqvarna and Triumph, it reflects a clear strategy to stay focused in the motorcycle space. This goes hand-in-hand with the growth of Bajaj’s own brands like Pulsar, Avenger as well as the more recent ‘V’ and Dominar 400.

While the company can handle the growth script of these models on its own in India, its global allies will play a big role in bolstering their presence in other markets.

In the process, this should ideally boost the Bajaj brand recall, which is already strong in markets like Africa and Latin America. ASEAN will clearly be the next big growth engine while partners like KTM and Triumph can hopefully extend this story to Europe, the UK and US.

Clearly, these are challenging times for the global motorcycle business where companies like Harley Davidson are facing headwinds back home in the US. There is a school of thought that believes young buyers are not making a beeline for these kind of motorcycles anymore, which means that there is perhaps better potential for more affordable mid-capacity options.

This is where cost-effective bikes in the 300-750 cc range can make their way into diverse markets, albeit with greater commonality in customer preferences. The likes of Triumph and KTM will obviously be keen to meet these requirements in order to grow their presence and Bajaj will play a key role here as it has successfully done with KTM.

This, in turn, begs the question: Will a Harley also turn to Bajaj for a similar alliance to be able to take on such challenges in emerging markets? For now, any partnership with Bajaj may seem completely unrealistic but anything could happen with the rapidly changing global bike market.

With KTM, Bajaj has clearly shown how a partnership can be steered successfully in the right direction. What started as a modest 14 per cent stake a decade ago has since grown to 48 per cent but, more importantly, set in place a strong roadmap for the future.

Back home, Bajaj will be keen on increasing its presence in a market where Honda has been seeing the fastest growth thanks to its super successful Activa scooter. As a result, the 100-110 cc commuter segment, which was largely dominated by motorcycles, is rapidly facing the heat from scooters.

Bajaj has, of course, chosen to steer clear of this space and would rather focus on bikes where the differentiator strategy is a key part of the plan. Although it does have models like the CT100 and Platina in the entry commuter space in bikes.

The Pulsar is still its flagship brand and continues to be the market leader in the sports segment a good 15 years after it debuted. The challenge now for Bajaj is to get some of its other brands to replicate this success story.