BusinessWorld India: When Size Doesn't Matter
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It is true the Indian middle class loves two wheelers. Statistics prove it. In 2014-15, a whopping 16 million bikes were sold in the country, and the Society for Indian Automobile Manufacturers expects the figure to double by 2025; it projects that in 10 years from now 32 million bikes will be sold per annum. The top names that are contributing to the rising sales figures of two-wheelers are Hero, Honda, Bajaj and TVS. However, the one to make it to the top in BW Businessworld’s list of Most Respected Companies among the two-wheeler manufacturers is Bajaj Auto, which has been far ahead of its competition in global competitiveness. The company’s 48 per cent stake in the Austrian sports-bike manufacturer, KTM, is paying off in creating great brand recall for the company.
Bajaj Auto has localised the global brand’s production in India by manufacturing bikes with six different engine capacities. Sources in the company say that all research and development related to bikes with engines capacities up to 800cc is going to be carried out by Bajaj Auto. Currently, the bookings for the new cruisers in the Avenger series are on the rise and the bike has already sold 13,000 units in November 2015, and the company has sold a total of 3,09,673 units between April and November 2015.
Honda Motorcyles has sold 3,26,895 units between April and November this year and Hero MotoCorp sold 55,0731 units during the same period.
While Bajaj Auto may be considerably behind Hero and Honda in terms of sales, it is the undisputable leader in the premium segment selling close to a million vehicles per annum.
“We are the leading manufacturers in the sports-bike range,” said Rajiv Bajaj, managing director of Bajaj Auto, on the sidelines of the launch of the new bikes in the Avenger series. He also hinted at Bajaj having a 25 per cent market share in the Indian two-wheeler industry. The company ended the second quarter ending September with an earnings before interest, taxes, and amortisation (EBITA) of 22 per cent, which was higher than its EBITA of 20.1 per cent in the financial year 2014-15. The company’s sales during FY2014-15 stood at Rs 22,523 crore.
Bajaj Auto is most popular for its two-wheelers, but it is not restricted to that segment. The company’s three-wheeler segment is equally popular. In fact, its three-wheelers’ sales, which at one point peaked at more than 4,80,000 units (including exports) in the financial year 2012-13, fell to 4,47,674 units in 2013-14, before recovering again in the financial year 2014-15. By the end of financial year 2014-15, Bajaj Auto sold 5,19,117 units, according to its annual report. The company has a 52 per cent market share in the segment.
Bajaj is also planning to soon launch the cheapest four-wheeler or as the management calls it, a quadricycle — RE 60 is said to be priced between Rs 1 lakh and Rs 1.50 lakh. The company has, however, run into problems with regulations. In its latest annual report, the company states, “As regards our quadricycle—RE 60, the product is ready for launch. However, RE 60 launch was mired in legal tangles created by vested interests filing multiple petitions in various high courts, questioning the government process in creation of this new category. Some of the high courts had, pending detailed hearings, ordered stay of the government notification in the interim; while some others admitted the petitions, but did not find merit to grant a stay. In the face of stay orders, ARAI — the testing agency — kept the approval and related processes in suspended abeyance.”
Unable to go ahead with its India launch, the company is now going to launch the vehicle in 16 different global markets. The RE 60 called “Qute” is a four-wheeler powered by a water-cooled DTSi, 4-valve engine with a fuel economy of more than 30 km to the litre and a top speed of 70 km.
“Qute has been designed for low cost, last mile public transport by optimising size, weight, cost and speed,” the company said in a statement.
One must remember the RE is a very popular three-wheeler brand from Bajaj Auto. Rumour has it that Bajaj has used the three-wheeler as an inspiration to make the Quadricycle.
Sources in Bajaj also confirm that the company is gearing up to re-enter the scooter market it quit seven years ago when it stopped production of iconic Bajaj scooters. Presently, the market is dominated by the likes of Honda and Suzuki.
“India will consistently be the world’s largest market for two wheelers and it will add more buyers in five years,” says Mohit Arora, vice-president of research and consulting firm J.D. Power Asia Pacific.
The competition is keeping up with Bajaj Auto. Hero MotoCorp too has acquired Eric Buell Racing, an American bike manufacturer, which now allows Hero to seriously compete with Bajaj Auto. Hero MotoCorp has the largest dealerships in the country with over 6,000 dealerships and service points, whereas Bajaj has only half the number. That said, the latter has carved out a niche for itself. If the RE60 or Qute becomes a hit, that will go on to prove that Bajaj can truly be a formidable automobile manufacturer. For now, the company that manufactured the iconic Bajaj scooters, is spending all its resources in bringing premium bikes to Indians at affordable rates.
(This story was published in BW | Businessworld Issue Dated 11-01-2016)