Bajaj Auto plots strategic launch pad for its 400cc midsized motorcycle

Bajaj Auto, India’s leading motorcycle maker and the largest two-wheeler exporter, has confirmed that it will roll out its 400cc motorcycle, understood to be its most expensive, powerful and fastest under a home-grown brand, in November this year.

On September 21, Autocar India broke news about the latest developments updating that the upcoming motorcycle, also commonly referred as VS400, will ride into the showrooms in November, and will be positioned under a different brand, which won’t be Pulsar.

In lieu of this development, while this underlines a drastic change of thought and strategy on the Pulsar brand and upcoming product(s) by the managing director Rajiv Bajaj, it also marks a window that possibly will now contain the future positioning of the company’s celebrated motorcycle brand.

Models ranging from 135cc to 220cc are currently sold under the Pulsar brand.

It can be recalled that earlier Bajaj Auto’s boss, on the sidelines of the launch of the KTM Duke models a few years ago (in 2012), had revealed the potential future progression of the Pulsar brand alongside KTM, much replicating the growth of the latter in terms of engine displacement, performance and premium positioning. “You can expect bigger KTMs and bigger Pulsars going forward,” he had said four years ago.

Nevertheless, the company now wants to set up a new motorcycle brand, to foray into the premium segment primarily taking on Royal Enfield, which is the largest selling brand in the midsize motorcycle segment currently.

In an interview published in Mint newspaper on September 22, 2016, Bajaj Auto’s MD was quoted as commenting; “Let me just say that a 400cc Pulsar makes as much sense as a 150cc Royal Enfield. So, when we are getting into a different category, it would be wise to look at a new brand.”

Brand new model

Besides the product positioning strategy, this move by Bajaj Auto is also understood to be an attempt to reduce its dependency from the Pulsar brand, which has been singularly driving its image and the domestic market.

Interestingly, the company retails (as listed on its website) 8 different models under its Pulsar brand and has a current portfolio of 17 different models in all including the Pulsars. This clearly highlights the dominant position of the Pulsar brand in the company’s portfolio.

Notably, while reducing its dependency on the Pulsars, Bajaj Auto found success in the Avenger and the newly introduced V brands. While, on one hand, it managed to consolidate the sales under cruiser category by rolling out the most affordable cruiser in India (Avenger Street 150) last year, the V15 has also given the new V brand much-needed recognition.

A quick look at the domestic industry sales data for the ongoing financial year between April-August 2016 highlights that Bajaj Auto has sold 233,432 units under Pulsar (averaging 46,686 units per month). With sales of 247,251 units during the same period, only the CT100 has sold more than the Pulsar’s cumulative sales. The Bajaj CT100’s monthly average stands at 49,450 units.

Interestingly, the Avenger and V brands put together are now also fetching handsome volumes for the company. While the Avenger has garnered total sales of 102,372 units, the Bajaj V15 has sold 122,400 units during the five-month period. The sales from both these brands now average close to 45,000 units every month, which undoubtedly has come as good news for the company. It is presumed here that the sales will logically peak during the festive months of September and October 2016.

Commenting on the timing of the rollout of the VS400, Bajaj Auto’s MD, in the same interview, said; “On the big motorcycle, I have also been waiting for a long time to get it right. We have to acknowledge that Enfield has 85 percent market share in that space, so we have to get everything absolutely right from the brand to the product to the launch, to the quality and price and all of that. Honestly, this launch was to be in the end of August, but then we realised that it will distract us from building volumes for the festive season and so, we have now delayed it to November. So, November is when this launch will be. I do not have an exact date.”

The timing for the rollout of the upcoming VS400 clearly highlights Bajaj Auto’s intent of continuing to push its monthly sales November 2016 onwards. Traditionally, vehicle sales witness a decline after the passing of the festive season, and specifically in the last months of the calendar year(s).

To keep up its sales push, the company also plans to roll out the 2017 range of its existing Pulsar models, which will see changes in terms of their appearances and performances.

“We did very well in our stronghold, the sport segment with the new Avengers last year and I am very pleased to say that we are going to launch between now and December, the 2017 range of the Pulsar, so significant change there in both their appearance and performance,” the MD had mentioned in the same interview.

Future of Bajaj Pulsar brand

Market experts foresee that the 135cc-220cc cap on the Pulsar brand will not hamper its performance and image in the market. Instead, this may take off the expectations from the celebrated brand to perform for Bajaj Auto, which looks at having more well-performing brands in its portfolio in the coming months.

Commenting in this regard, Abdul Majeed, partner, Price Waterhouse and an automotive expert, says: “The 250cc-400cc motorcycle segment has seen phenomenal growth, although the base remains small. Bajaj Auto clearly aims for the potential growth in the premium motorcycle segment, which is seeing increasing traction due to growing disposable incomes of young buyers, changing preferences of the higher middle class and other factors. I don’t think introducing an all-new premium motorcycle brand will dilute the market perception of Pulsar. If you look at the company’s perspective, branding a premium motorcycle under the same family that has 150cc, 180cc commuter bikes might not work. Reducing dependency on Pulsar is a very important move because a company has to spread its wings to ensure future growth in the market, which is characterised by highly volatile preferences.”

Majeed sees this decision as a well-thought strategy to offer existing customers a more aspirational brand from the parent company, while adding new mature base of buyers.

“Capturing customer preferences across different age groups and ensuring that you align your decisions with them is a characteristic of a successful OEM. As long as you are offering value for money and retaining those core attributes such as quality, overall performance, aftermarket services, package - customers will keep coming back to you. Bajaj Auto is trying to have relevant customers in all growing motorcycle categories. Such strategies are not only seen in the two wheeler segment but also in the passenger car segment. Maruti Suzuki also did the same under its Nexa strategy. They don’t want to lose their existing customers when they upgrade themselves to a more aspirational brand. This is a very important step for any company to become a global OEM,” he explains.

VG Ramakrishnan, managing director, Avanteum Advisors LLP, too is of the view that introduction of an all-new premium motorcycle brand won’t affect the future of Pulsar for Bajaj Auto. Explaining the core business reasons behind changing product and branding strategies in the automotive industry, he elaborates: “At one point in time they wanted to retain the Pulsar name for all the high-end bikes. What I see is that after they put out the V brand, it looks like that they can recreate the success that they recently received. Of the many reasons, we need to understand when companies opt for a different brand strategy, they may be planning to avert the risk associated with product recall. I think the risks associated with a recall may probably be pushing them (Bajaj Auto) towards creating an alternate brand for premium bike segment. In the last few years, a lot of rejigging in automakers’ strategies can be noticed. Companies have changed their strategies according to the dynamic market movements. For example, Honda Cars India was forced to bring vehicles on the diesel engine platform. Or Bajaj Auto rejigging its Pulsar strategy with a new premium brand it perfectly understood.”

According to Ramakrishnan, the company may consider a separate distribution network for the upcoming premium motorcycle, which may also include extending its existing Pro Biking network.

“Also, they may look at a separate distribution network for the 400cc motorcycle. They may have select retail stores for this offering, which may include extending their network of Bajaj Pro Biking stores. If you compare with the likes of Royal Enfield, CEO Siddhartha Lal has been speaking about offering a premium retail experience to its customers, which has clearly delivered for the company. Bajaj Auto is expected to make similar efforts in selling its upcoming premium offering,” he adds.

For September 2016, Bajaj Auto recorded its highest-ever domestic monthly sales of 230,502 units in a long time, if not its best-ever so far. October 2016 is expected to further push the sales numbers, peaking for the year. Stay tuned.