Bajaj Auto’s ride remains firmly on motorcycles

Eric Vas explains why Bajaj Auto is differentiating from the competition, why the company is not convinced with scooterisation in India, and the growth path ahead.

Domestic two-wheeler major Bajaj Auto with a revenue of around $3.6 billion (Rs 23,032 crore) in FY2017, believes that a leader is not defined by the number of vehicles an OEM sales. “I don’t think sales number define a leader. My view is simple. Customers view us as leaders,” Eric Vas, president (Motorcycles), Bajaj Auto tells Autocar Professional.

Vas states that the company considers itself as a leader based on the quality of customers, audiences, and market perception that it commands. He mentions that there is a difference between what a customer aspires for and his purchase decision; given the purchasing power of the consumer, the rational decision is taken. Vas says, “Globally, Japanese car brands have higher sales numbers but if you ask any customer for the premium vehicle that they would like to purchase, a majority of them would pick German car luxury brands.”

Elaborating on the leadership position, he explains that the company, despite being one of the late entrants in the entry-level commuter motorcycle segment, enjoys a healthy premium market share. Bajaj Auto has been a pioneer when it comes to introducing industry-first features in the country. For instance, it was the first Indian OEM to launch a four-stroke scooter, termed ‘Legend’.

Scooters and more

India is currently seeing strong growth in sales of scooters, leading to the coinage of the term 'scooterisation'. This trend is unlikely to die down soon due to affordability and practicality afforded by scooters. In fact, at present one of every three two-wheelers sold across the country is a scooter. Even so, Bajaj Auto is not attracted to enter the scooter market. Vas says: “Scooters certainly had and continue to have a great run. But the customers for this segment are a very distinct set of people. For all the practicality of the scooter, once you go on a bad road, the scooter will fail. Secondly, fuel efficiency is a huge thing; we tend to ignore it but the prices have been going up for petrol consistently.”

The company believes that unlike a motorcycle which is a personalised purchasing decision, buying a scooter is similar to purchasing a household-appliance. Vas says: “There is a fundamental difference between the buying pattern of a scooter and a motorcycle. In a scooter showroom, you can observe the family will come and buy a scooter. The decision of buying a scooter is actually nobody’s decision, the wife has a say, as does the husband and the child. Everybody uses a scooter, so what happens when you are buying a common utility like that? It is like buying an air-conditioner, it is something that everybody uses. Buying a motorcycle is much more of an individual decision. Where do you think a person will spend more money? Personal decision, which is why globally motorcycles sell at a higher price-point compared to scooters.”

Vas is convinced that despite the practicality of the scooter, it cannot sell beyond a certain point. He claims that the problem of congestion exists globally, but high-priced scooters are not something that even developed markets witness. Vas says, “At an industry level, it (scooter) is a concern, somebody has taken a certain volume but does it concern me (specifically)? The answer is no. In my play, I believe we have enough headroom in the motorcycle segment. Once it is done, then I might worry about scooters.”

Sales and strategy

The two-wheeler major saw its domestic sales fall in 2017. In the April 2017-January period, its market share stood at 16 percent in the motorcycle segment and 9 percent in the overall two-wheeler segment, having sold a total of 1,640,101 units. In January 2018, it recorded sales of 163,111 motorcycles registering YoY growth of 36.15 percent.

The company states that in 2017, there were various hindrances that impacted its numbers. Vas says, “2017 has been a very peculiar year. It started with the BS III to BS IV switch, then went into GST, every OEM had its own approach to deal with this. We shifted to BS IV first, so we couldn’t participate in the great fire-sale that happened on March 30-31, 2017 when competitors spent huge money to liquidate their stocks and gained market share. So, I think one should stand back and look at the portal period. In fact, we saw a similar impact in November and December 2017.”

In January 2018, the company reintroduced the Discover 110 commuter motorcycle and the updated Discover 125 model, marking it as the second Discover model and the sixth commuter in Bajaj's line-up. The other commuters Bajaj currently has on sale are the CT100B, Platina 100, Discover 125, V12 and V15.

According to Vas, Bajaj Auto is now brand-ready with its product offerings. The company claims that its differentiation strategy is not based on refreshing the aesthetics but focusing on new technology, features and being the leaders in terms of industry first-offerings in its product offerings. Going forward, the company aims to increase its market share to 23-24 percent from the current 16 percent.  

Pulsar of the matter

The Pulsar brand, which the company introduced in 2001, was projected as an entry-level 150cc sports bike. The Pulsar 150 marked the first Indian motorcycle that featured a front disc brake, considered a premium feature at the time, as standard. Another stride for the brand was the order for 1,500  Pulsar 150s by the Indian Army.

The refreshed versions of Bajaj's motorcycle range have the responsibility to revive the OEM's sales in the domestic market. 

The Pulsar brand has undergone huge transformation and has had around 13 refreshes and variants till now, the latest being the Pulsar NS200 with ABS in November 2017. Interestingly in December 2017, the brand crossed a milestone of selling more than 10 million units globally over 16 years. The brand, which was introduced as an entry-level premium bike, now commands a healthy market share. Vas says, “I don’t think there is too much of competition for the Pulsar brand. Despite many new entrants in this segment, we haven’t lost market share.”

2019 and ABS

The central government in a notification in 2017 announced that from April 1, 2019, all new bikes sold in the 125cc+ category will need to be equipped with ABS mandatorily. This decision taken in the interest of public safety has got many OEMs in a tight situation. It is estimated that the average difference between a non-ABS equipped motorcycle and the ABS-equipped motorcycle can range between Rs 10,000 to 20,000. Bajaj Auto is no exception; in fact, Vas agrees that the cost of incorporating ABS in its product offerings will be significant but on the other hand he is optimistic that with the volumes rising, technology cost would come down substantially. He says, “Right now, there is price differentiation between non-ABS and ABS bike variants. As volumes pick up, the cost will come down, but still, it is a lot (20 percent).”

Bajaj Auto has seen a slowdown in its domestic motorcycle during this financial year. Motorcycle exports have seen growth. 2018 got off to a good start, with a rise of motorcycle sales in the domestic market during January, aided by the new Discovers. The company expects to improve overall sales volumes in the domestic market on the back of new offerings which include a mix of new models and refreshes of existing ones.

(This article was first published in the 1 March 2018 issue of Autocar Professional)