Auto focus

How innovation, exports have helped Bajaj ride headwinds

Murali Gopalan | Updated on August 16, 2019 Published on August 16, 2019

Weathering the storm: Rajiv Bajaj, MD, believes that the company has played to its strengths   -  Paul Noronha

Managing Director Rajiv Bajaj says tight control on costs has also played a key role

It was sometime last week when an unusual protest took place outside the Bajaj Auto facility at Akurdi near Pune.

The protesters represented the city’s barbers association. They were upset about the company’s advertisement on the recently launched Platina 110 H Gear which, they felt, was not exactly flattering to their community. They demanded that the commercial be withdrawn.

For the record, the ad shows the rider getting a smooth shave from his barber seated behind even while the Platina weaves in and out of traffic. Clearly, the message was to drive home the smooth ride even while it ruffled feathers of the barber community.

While this was an unexpected reaction, the bigger story here is the Platina’s rapid growth story, which is part of a carefully thought out business strategy. Along with its siblings in the Bajaj Auto stable, CT100 and Pulsar, Platina is weaving a successful script for the company.

Things working out

Clearly, things are working according to plan going by what the stock markets have to say. Data shows that every other auto brand has seen a huge erosion in market capitalisation year-on-year with the fall ranging from 28 per cent to 57 per cent. This is not entirely surprising given the state of the market and how auto companies are struggling to cope with the headwinds.

Yet, amidst this list, it is only Bajaj Auto that is in the positive zone, which is quite something during these troubled times when plant shutdowns have become the order of the day. Rajiv Bajaj, Managing Director, is naturally pleased that the company has outperformed many others and reiterates that all this is a result of a carefully thought out strategy paying rich dividends.

There are three key pillars that form part of this plan, of which the first is segment innovation in the domestic motorcycle space. The exercise kicked off in April last year and the results clearly indicate that the company has been successful with brands such as the CT100, Pulsar, Avenger, and Platina. Market share in motorcycles grew to 20 per cent last fiscal and the momentum is still in place even while there is a clear bloodbath all around.

The last month has seen the launch of the CT110 and Platina 110 H Gear (which featured the smooth shave commercial) and Bajaj is confident that the growth story will continue. He is especially upbeat about the more recent entrant, Pulsar 125, where the impact will be more visible from September. The company’s internal target is to increase its overall domestic market share in motorcycles to 25 per cent by the end of this fiscal, which will then mark a significant jump from last year’s level. “All this is happening thanks to segment innovation,” reiterates Bajaj.

However, is there a possibility of brand Pulsar being diluted because of the new 125 cc avatar, which is a detour from its more powerful 150 cc-plus range? Its MD does not subscribe to this thinking. He points to the KTM 125, which is manufactured at the Chakan plant near Pune and exported across the world.

KTM is the Austrian bike brand in which Bajaj Auto has a 48 per cent stake. It has expanded its portfolio to include lower engine displacement bikes like the KTM 125, which are made in India and shipped out to other countries.

No brand dilution

Bajaj makes clear that there is no brand dilution in the KTM 125 just because of the smaller engine. “When you introduce a KTM 125, it should be a KTM and just not another 125 cc bike,” he explains while driving home the point that the brand DNA is still intact.

The same analogy holds good for the Pulsar 125 and Bajaj is keeping a careful eye on market feedback. For instance, he was “thrilled to hear” that people said it feels like a 150 cc and not a 125 cc motorcycle.

The MD is also is all praise for the R&D team, which has “done wonderful work” in ensuring that the Pulsar 125 is one of a kind that will not feel like any other 125 cc motorcycle in the market. More technology has gone into this bike, which will mean a premium positioning vis-a-vis other competing models in this space.

The second pillar of the Bajaj Auto strategy is in exports, which are growing by 10 per cent and, therefore, “remarkable” in the current environment of global volatility. Trade wars are now gaining traction and there is huge geopolitical tension across the world.

“There is trouble almost everywhere and despite all this the fact that we are still growing is remarkable,” says Bajaj. The exports drive has also ensured that the company is relatively better insulated from most other counterparts in the current slowdown in India. Sales have been falling rapidly across product categories and this is where overseas shipments have more than helped counter the balance.

Exports have helped

“From my point of view, segment innovation and investment in exports has helped us especially during this time when the market is falling,” says Bajaj.

The third pillar of the success story is the tight control on costs that has helped weather the slowdown. To put this in context, it is no secret that car dealerships have been shutting down at a rapid pace over the last 18 months with the most recent tally being 286.

Dealers have privately confided that companies went overboard with new showrooms in anticipation of the good times continuing.

All these projections went completely haywire when the market imploded instead. Today, with the slowdown not likely to disappear in a hurry, all these huge dealership investments have ended up hurting the retail community big time.

By the end of the day, it is clear customers are not interested in all this razzmatazz, which also explains why small has become the norm for many car-makers in the dealership space. According to Bajaj, the current downturn is part of a business cycle where it has managed to weather the storm thanks to the three-pillar focus of segment innovation, exports and cost-control.

In an earlier interview, the MD had said that the company has been doing well “as we played to our strengths... our strong brands in the entry and sports segments”.

“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,” he added.

Bajaj also acknowledges the valuable tips received from Harsh Mariwala, Chairman of Marico, who had told him last year that he could perhaps look at low-cost innovation as a way forward.

Valuable tips

This was the ‘penny drop’ moment for Bajaj, who quickly understood that the solution lay in offering some differentiation with affordable innovation.

By the end of the day, the buyers of products such as the CT 100 and Platina will pay just a little bit more but the innovation needs to be big. “Today, these two models have a host of new features, which all qualify as low-cost innovations. All this is thanks to Mariwala,”says Bajaj, who in an earlier interview, has referred to the Marico Chairman as “one of the biggest marketing brains”.

Bajaj had also said that low-cost innovations in commuter bikes were a different kind of challenge compared to sports bikes where one can liberally play around with the bells and whistles. In commuter bikes, there is “a little more cost but a lot more thought”.

Eventually, there should be enough surprise and credibility in low-cost innovation even while it should “be self-evident” to the customer.

Published on August 16, 2019
This article is closed for comments.
Please Email the Editor