Eric Vas, president – Motorcycle Business, Bajaj Auto, speaks to Amit Panday on the company taking the lead in India on BS IV compliance, targeting monthly sales of 10,000 units of the Dominar 400, evolution of the Pulsar brand and lots more.
With Bajaj Auto having upgraded all its motorcycles to BS IV emission norms ahead of the April 1 deadline, how do you see market forces at play in the wake of new increased retail prices?
I think customers are a lot more sensitive to these things than many of us realise. When we launched the Pulsar RS 200, we offered ABS as an option on the motorcycle. A number of people had cautioned us that ABS does not sell in India. At that point, we had shared with them our assessment that we see a divide in the market. Customers who belong to the category (of bikes priced) above Rs 100,000 talk a lot about ABS. At the time, we did not know how much it would sell.
Later, we were pleasantly surprised that more than 50 percent of the RS 200’s sales came from the ABS variant. When we launched the Dominar 400, we had an ABS option. The sale of the ABS variant is far more than the non-ABS variant.
Now in the context of BS IV, a lot of customers walk in and ask for a BS IV-compliant bike. I am talking about rural areas and not (only) an urban market. I think people are a lot more aware about pollution and the environment because these have been issues of a long time now. I definitely believe that the market actually seeks BS IV-compliant vehicles. I think we should give credit to the people as they generally, as consumers, do not want to do the wrong things. They would rather do the right thing. And I think that we as manufacturers often underestimate this, whether it is about ABS or BS IV norms.
We began producing BS IV bikes from September 2016 and shipping them to dealers from October. Progressively, we rolled out our entire range until January 2017, which is when we stopped making BS III-compliant vehicles altogether. Today, most of our dealerships have BS IV-compliant bikes. There will, of course, be some BS III inventory, which will finish off by end-March.
From a market perspective, we will have a price disadvantage because a BS IV vehicle is more expensive (than BS III). There is additional equipment that you put on the vehicle to comply with the evaporative norms, exhaust emissions and other technical aspects that involve extra costs.
So, obviously, we are concerned about the price advantage others might have if they put out a lot of BS III-compliant bikes in the market. However, how long that advantage will last? I think given the kind of view the EPCA is taking on this issue, I suppose the authorities will not allow too many BS III-compliant bikes to be put out on the roads. You cannot have an unequal playing field in the economy where you demand compliance of a particular kind. In this case, compliance was very clear in our minds that a full one year before April 1, 2017 was given to the manufacturers to prepare. We sincerely believe that the BS IV regulations were announced for a purpose.
Basically, they asked the industry to shift to BS IV emission norms so that the country switches to the better standards and sells only BS IV-compliant bikes (after April 1). This, to our minds, is the logical interpretation of the government policy. But others may have different views and they are entitled to have them.
We believe that customers are very responsive to BS IV and they will recognise and reward people who lead in these matters.
India is the world’s largest two-wheeler market. Unlike the passenger car segment, Indian OEMs dominate the two-wheeler space. This means ideally we should be the leaders driving standards globally. We should lead in areas like emission norms, safety, cleaner technologies and others. We should set high standards and not follow others. I am happy that we will have BS VI norms for two- wheelers by 2020. I hope we ensure that April 1, 2020 is understood as the date for sales and registration of vehicles rather than for manufacturing.
As far as the market is concerned, I believe that the effect of demonetisation has still not left us. The growth of the motorcycle industry has barely been there. I know a lot of manufacturers built a lot of vehicles in January. We have been monitoring our retail very closely, keeping our stocks under control. We see the retail growth in this industry in January has been zero percent over January 2016. Before demonetisation, we had double-digit growth over the previous year. Now we (industry) have moved from negative to zero, so that’s some movement. Only time will tell as to when original growth will return. As of now, we will see how March 2017 sales go as they will set the tone for the next fiscal.
Converting a massive portfolio of 17-18 motorcycle models means a lot of back and forth work with the vendors. How was the level of cooperation with them?
It takes a lot of work and that’s what consumes time. We as an OEM can probably execute a change very fast but we depend on our vendors to make all the necessary changes in their products. For them to manage so many models – and many of our vendors are also suppliers to other OEMs – this is never an easy task. While they have to ramp up to those levels and stabilise their production, we have to stabilise our production; it is not easy to switch over. The question is, why should things be left for the last moment?
The Dominar 400 sold over 3,000 units in January, a good number given the segment it caters to and the current market sentiment. Going forward, what are your expectations from this new brand?
When we had launched the Dominar 400, our managing director said that we want to eventually sell around 10,000 units of this model every month (including exports under the initial phase and subsequently exclusive of exports). Currently our capacity (for the Dominar 400) is around 3,000 units per month. We will gradually move that up.
We aim to hit production of around 5,000 units by April, and then subsequently increase it because this is a sophisticated product and the supply chain needs to time ramp up its capacity. Achieving domestic sales of 10,000 units of the Dominar 400 (each month) is our target.
The initial response, after the model’s rollout at out dealerships in 22 cities, has been very encouraging. Expanding the availability network for the Dominar 400 is taking some time as we have made a number of changes required for dealers if they want to sell this product. It means upgrading all our dealerships, customer touch-points and sales and service outlets.
Raising the standards of technical servicing was easier because we already have technicians who are familiar with this level of technology (thanks to the Pulsar RS 200). We already have ongoing training for technicians and servicemen for the Dominar 400 across many dealerships. I think we are in a good position to effectively have close to 80-100 cities by end-March. In terms of dealerships, this could be around 200 dealerships. This will make the motorcycle available to a large set of Indian consumers and with that I am sure it will sell in fairly respectable numbers.
Setting up a reliable service support is very important for us. We don’t ship the bike to a dealership unless the training compliance is received from them. Training is given for service, spare parts and sales.
As you said before, the Dominar 400’s ABS variant is selling more than the non-ABS one. Do you see this pattern continuing?
Customers seem to want to buy the ABS version more. This reflects great awareness among customers about the benefits of advanced technologies like the ABS system. Of course, there are some who prefer the disc variant and we are very happy to sell them that. But this reflects a certain trend among customers. There is a lot of appreciation for some of the technologies that exist out there and I think many manufacturers have, probably, not looked at them.
With the Dominar 400, we have tried to offer technologies that we believe make sense in the Indian context. We have worked very hard at engineering them to the right price point(s) and bring them to the country.
This trend harks back to the time when we first launched the Pulsars. We were the first to put in a projector headlamp (in the Pulsar 220), we popularised disc brakes, DTSi technology, monoshocks (suspension setup), and many others. We have always tried to bring contemporary technologies to the market. For example, the Dominar is equipped with a lot of contemporary features which you don’t find in a bike of that specification normally. Things like ABS, all-LED headlamps, slipper clutch – all very formidable technologies in their own right.
Some customers have written to us about how happy they are with the Dominar 400. I hope that their tribe grows.
Do you think the non-ABS variant of the Dominar 400 might cannibalise sales of the Pulsar RS 200 as the pricing of both these models is very close?
I don’t think there will be any cannibalisation between the two. From what we have learnt is that the customer for a fully faired bike is very different from the one who likes a naked one. Whatever we have learnt from selling the Dominar 400 over the past few weeks from our showrooms, we have seen that there is absolutely zero intersection between the two customer profiles. We have not seen any drop in the retail of the Pulsar RS 200 due to the Dominar 400. The performance of the two bikes is also very different; customers are fairly evolved today and understand what nature of bike they want.
When you say it (Pulsars) will continue to evolve in future, should one understand that it will evolve within the current bandwidth (135cc-220cc)?
I will not answer this question. Honestly, we don’t look at it in terms of such a tight bandwidth of cubic capacity. We look at a type of customer and ask ourselves, ‘What does this customer want?’ We then try to solve that. This is the reason why the RS 200 and AS 200 came to the market.
Yes, the AS 200 needed a lot of work to be done and we are currently completely re-working it. The NS 200 had a big fan following, we brought it back in much better form than ever before. We will bring the AS back also when we are ready. So the Pulsars will keep evolving. I don’t want to say that it will never go beyond 220cc, if we will see a need to put a 300cc, we will do so. But it will only evolve with its customer base.
Naked Wolves, a Pulsar 200 NS exclusive club, is promoting the model. It seems the company never really gave up on the Pulsar NS 200?
Yes, it is a Pulsar 200 NS-only club. To best of my knowledge, Naked Wolves is the only modern rider club that belongs to a single bike. They only ride the NS 200 and are a huge fan following. The bike that we brought back is actually very different from the earlier one. A lot of improvements have been done to the powertrain and a lot of refinement has been achieved under the hood quietly.
The Bajaj V clearly stands out with its design language as against all other commuter motorcycles. What is the strategy behind bringing a 125cc variant of the Bajaj V as against powering it with a bigger engine?
When we rolled out the V15, we clearly conveyed that it is a commuter. You don’t find too many 180cc and 200cc commuters in the market (relative to 150cc and smaller engines). Buyers in that category (180cc and above) generally look for performance. The biggest commuter market in this country probably sit somewhere between 125cc and 150cc.
The 125cc motorcycle market is an interesting, high growth market in the industry. The challenge for us was to get a 125cc engine that actually sounds and feels like a much bigger engine. If you sit on the V12, you will not be able to often recognise the difference between the V12 and the V15. That takes a lot of doing. It was easier to deliver the 150 (V15), otherwise we would have done and delivered the 125 (V12) earlier. Our R&D had to work really hard to deliver an engine like that. It is a long-stroke engine, its exhaust took a lot of work to do, and its power delivery is tuned in a manner that it gives you that feeling that you are adding a lot more torque than a regular 125cc.
Being a commuter, we always wanted to play at that end of the market. However, that does not restrict us from rolling out a 180cc or 200cc model tomorrow. However, we must be convinced that there is enough space up there. As a brand, you can always stretch as long as you can justify and believe that the market exists and that you can evolve that market in a particular way. At this point in time, that market is very thin. We are the largest sellers of 200cc bikes in this market and we know our customers fairly well at that end of the market. Honestly, as of now, we find that there is not enough space for this kind of bike at that end of the market. I think the space exists in the 150cc-125cc band, which is where we took this product.
Let’s see how it evolves because the Indian market is so interesting as it is continuously evolving. What was correct six months ago gradually starts changing and may probably change in another year. We are tracking the market closely; that’s what we do in product development. We read patterns and discuss internally if we can develop concepts around it. So, as I said earlier, a lot is happening around the Pulsars, which obviously I won’t speak about. We never constrain ourselves with cubic capacity.
Are you looking at stable monthly sales of 30,000 units each from the Bajaj V and the Avenger brands in the coming months?
I think the Bajaj V (pictured above) can stabilise at that number very easily and the Avenger would stabilise at around 20,000 units per month, which is what our target always was for that brand. We have delivered on that all of the last year and I hope we continue delivering in the future too.
The company had previously spoken about taking the Avenger up in terms of engine and performance. What are the updates on that front?
We will look at that space very carefully and update you when we are ready.
Once it gets ready for the market, will it still be branded under the Avenger umbrella?
I won’t be able to answer because it depends upon our reading of the customers in terms of how they evolve and where they go. A brand can stretch as long as the customer profile remains similar.
If I may draw a parallel, Volkswagen stretched its brand up till the Phaeton, which did not work for them. However, nothing stops them from positioning cars until the Passat level, which is a very successful model globally. The Audi brand, on the other hand, moves in a completely different orbit, which is positioned much above the VW brand in the market.
Brands may overlap to some extent but they exist in their own space. The objective of the OEM is to find the natural definition of different brands and place them in the market accordingly.
For us, it is important to understand the space in which the brand exists. To answer your question, certainly the company will get into that space. Whether the Avenger brand goes up there or not will depend on the customer feedback. The decision will also have implications on the product design.
The Pulsar brand has remained Bajaj Auto’s flagship brand for the longest time and the company remained dependent on Pulsar variant sales. However, Bajaj Auto has now established other brands too. Will the Pulsars remain in the 135cc to 220cc bandwidth in future also?
I may not be able to comment on the future plans. But yes, as of now, the Pulsar sits in that bandwidth. Obviously, the Dominar 400 is the biggest bike that we have. You put a Dominar 400 next to a Royal Enfield, and the Dominar is bigger in size, bigger in presence and bigger in power.
However, the Pulsar remains to be an iconic brand for us. All iconic brands evolve. They evolve around cubic capacity, style, applications and many other parameters. The Adventure Sport was one such application (AS 150 / AS 200).
The Pulsar brand will continue to evolve. I don’t see any company that restricts itself to one brand. It is a brand that attracts a certain type of customers and we will do what is essential to retain that customer with us.
Even FZ (Yamaha) and Hornet (Honda) are vying for the same type of customers. The Avenger, on the other hand, works to attract a different type of customer although the price points are very similar between the two brands.
The Dominar is designed to attract a very different profile of customers. With the Dominar, there are many features including price, cubic capacity, size, power, applications that differentiate it from other models. You can ride it to work and also on the highways. It’s got a lot more technology, which is expensive. If, for example, we make a fully-faired Dominar, it will be a horribly expensive vehicle. So our strategy is always to search for certain types of customers in the market and then figure out how we address them.
For us, the Pulsar will continue to be a very important and key brand but certainly not the only brand. We will put developmental resources into a number of brands, the Dominar being the latest example of that. Bajaj V is also a big and successful brand for us. I think in a market which typically talks about price, wheelbase, tyre size and fuel efficiency, we have come in and launched a bike that contains the metal of the most iconic warship India has ever had (INS Vikrant). We tell our customers how V looks different than all other bikes in the market. Around 20,000 customers buy the Bajaj V every month. We wanted to play the game differently and we have succeeded in doing that.
An entire generation of youngsters have grown up with the Pulsar brand. What can the Pulsar loyalists look forward to?
They have the Dominar to upgrade to. But I agree with you (on the Pulsar-loyal customer base). Actually, the Pulsars have also evolved. For example, it started with the Pulsar 150 and Pulsar 180, then we brought in the Pulsar 220, which has done really well for us.
The BS IV changes on the Pulsars are quite significant changes in terms of refinement, power delivery, throttle response. A huge amount of stuff has happened, which I call as below-the-hood engineering. It’s not apparent but you realise it when you ride it. I think a lot of changes have been done to the Pulsar 150. It’s like an all-new engine, which offers performance of a different level altogether.
So yes, as of now, it sits in that cubic capacity band. The price also goes up to nearly Rs 136,000 or so. So price-wise, it has a large bandwidth.
There is one manufacturer that is almost operating in isolation with several models in the 100cc motorcycle category. Although Bajaj Auto has models like CT100 and Platina, it seems that the company aims to focus more on pulling the buyers of 100cc-110cc sub-segments up to 125cc and 150cc categories as the market continues to evolve. Is it so?
It is wrong to understand that we don’t want to play at the lower end of the market. Our strategy as a company is that we don’t play as a company but we play as a brand. We try very hard to position these brands appropriately. The CT100 is a no-nonsense bike, it comes only in the kick-start variant because it is positioned as the bike with the ultimate value for money. It is a bike as economical and as minimalistic as it can get. It is for a first-time buyer who does not have his personal mode of transportation and who is looking for a low-cost solution.
The Platina, on the other hand, makes a very different proposition to the customer in the same category. It is for someone who is looking for the most comfortable motorcycle with best fuel efficiency in the market. It comes only in electric start, it does not have the kick-start variant any longer because then you can’t talk comfort if you are not offering an electric start feature. Its seat, suspension, footpegs and other features are specifically engineered to deliver extra comfort to the rider.
Both are 100cc bikes but for very different 100cc customers. This shows that we are very serious about the 100cc segment too. I think you can run a network with much lower volumes. You don’t have to sell 200,000 bikes to run a network. You can have an equally great network selling 50,000 bikes provided that they are the right size for that volume.
We believe that the 100cc bike market deserves a lot of attention and focus and I think we have given it that much attention. The Platina innovations did not come in a single phase. We have transformed the Platina from one type to a completely different Platina today, which includes a lot of work across R&D, production and marketing teams. We are very serious about this end of the market because it sells over 500,000 units every month. I don’t think we can ignore this market. We accept that there is one dominant player in this category, which is Hero MotoCorp and they have done a very good job with that. However, we are here to compete with them.
Yes, as a company we have been very successful at the upper end of the market with the Pulsars and Avengers. Bajaj V has made a significant impact at the upper end of the commuter bandwidth too. If you are getting into the premium commuter space, you can have a model at the top end, in the middle and at the bottom end to tackle the market. Our strategy is to have the Discover at the bottom. The Discover 125 does very well in some markets, and it has given us stable volumes through the last year. We love the bike and keep it there and don’t make any noise about it. And we put the V at the upper end of the market and it has done well for us. So, it is wrong to say that we only focus on the upper end.
What are your priorities going forward?
We have been very busy with a lot of work. My priority, very clearly, is to improve the quality of experience our customers have with Bajaj Auto products. We are putting a lot of focus on excellence at our dealerships. We would like to achieve a status that when a customer thinks of a motorcycle, he thinks of Bajaj Auto because we are dedicated to manufacturing motorcycles; we don’t get distracted by making scooters and other stuff. We look forward that our customers enjoy riding our motorcycles more than using them as mere transport.
Also, I hope that we recover from the impact of demonetisation by end-March. We look forward to a much better FY2017-18. However, we will have GST coming in the next fiscal. We don’t know how it will impact as the rates are still not announced. Once that falls in place, then we will probably know what happens to the existing stocks at the dealerships. I think these are very important transitions that need to be looked at. I hope that the government looks into the transition issues associated with the GST and fixes them one by one.
This interview has been published in Autocar Professional's March 1, 2017 'Two-Wheeler Special issue.