Under Rajiv Bajaj, managing director, Bajaj Auto, the two- and three-wheeler maker plans a small car to take on the Tata Rs 1lakh car. Mohini Bhatnagar reports.
The latest issue of the US business magazine Forbes carries a cover story profiling Rajiv Bajaj, MD, Bajaj Auto (issue dated 26 September, 2006) and son of the charismatic Rahul Bajaj who has been synonymous not only with the two-wheeler industry, but the face of Indian business.
The authoritative business journal, in earlier issues has profiled the accomplishments of Indian business giants like Azim Premji, chairman, Wipro Technologies and Lakshmi Mittal, chairman, Mittal Steel.
The current issue of Forbes details how Rajiv Bajaj turned around the scooter-maker Bajaj Auto, which till the early 2000s was fast losing out in a market moving towards aggressive Hero Honda's motorcycles.
That Bajaj Auto has once again reclaimed its place in the two-wheeler market within five years speaks volumes of the younger Bajaj's turnaround strategy that included launching new products in a changing market place and changing the image of the company from a stodgy scooter maker into a trendy motorcycle manufacturer. Moreover, Bajaj Auto's success at present is all the more remarkable because it is up against stiff competition from Honda, Suzuki and Yamaha, unlike when Indian companies thrived on protectionism.
Bajaj completed his mechanical engineering from Pune University and Masters in manufacturing systems engineering from the University of Warwick in 1991.
He joined Bajaj Auto as officer on special duty in 1990, and become general manager (products) in 1993 and vice-president three years later. In 2000, he was named president of the company and later joint managing director.
He was officially appointed managing director in 2005 but unofficially had taken over the job much earlier. In 2000 when Bajaj took charge of the company, many things in the country had changed in the seven years of liberalisation. Most importantly a number of MNCs had entered India mostly through joint ventures with Indian companies and the market was flooded with new products especially in the automobile segment. He also watched Bajaj Auto lose market share - for the first time in 45 years - to Hero Honda.
Forbes quotes Bajaj as saying that Hero Honda's dominance was so great in the late '90s that motorcycles, regardless of their brand, were simply known as Hondas.
In one of his interactions with the press, Bajaj recounted that in 2001 despite the fact that Bajaj Auto had an overwhelming share of the scooter market, it had not made a dent in the motorcycle market. Since the market had shifted to motorcycles, Bajaj Auto's market-share in the two-wheeler segment had eroded though it maintained its share in the overall scooter market.
Therefore, the shift to motorcycles was a matter of compulsion for the company. But along with it came a change of image.
The shift actually started when in mid-1999, when Bajaj Auto tied up with Kawasaki of Japan to launch the Kawasaki Bajaj CBZ one of the most expensive motorcycles in its league. The reason for the Kawasaki tie-up was to expand Bajaj Auto's product portfolio and to improve its brand image.
At the Auto Expo of 2000 Bajaj Auto showcased 17 new products. The difference from the previous year was that the all the products displayed were brand new products that were due for launch during the year and not mere upgrades.
The only segment in which Bajaj Auto never lost its dominance was in the sales of three-wheelers used as goods carriers and passenger carriers. These enabled the company to maintain a degree of profitability even when sales of its two-wheelers had dropped. When Bajaj assumed charge of his company the process of change began to manifest itself in ways that would eventually change the face of Bajaj Auto. These included shutting down the Aurangabad plant, cutting the vendor list by 80 per cent and offering a voluntary retirement scheme to workers to bringing down employee strength from 23,000 to 11,000. He also got Kawasaki to customize bikes for the Indian market offering more mileage and value for money.
Next Bajaj Auto launched the Pulsar that had power and style and was built on internally-developed digital twin spark ignition (DTSI) technology. The Pulsar proved an instant hit in the marketplace. Bajaj Auto followed this up with an even more stylish Discover, which, despite its price tag, was also a success.
Next, Bajaj launched the bread and butter CT 100 model to challenge Hero Honda's Splendor. Soon, Bajaj Auto was back in the reckoning and within touching distance of the top slot. A key aspect in the production chain was setting up a motorcycle factory at Chakan near Pune with an investment of Rs 300 crore in the first phase to increase production.
Last month, Bajaj Auto announced a further investment of Rs 2,000 crore to set up a greenfield facility at Chakan in Pune for producing a new range of three-wheelers and light four-wheelers and signed a memorandum of understanding with the Maharashtra government for this.
The greenfield facility will house a capacity to manufacture 500,000 units of three-wheelers and four-wheelers, including a goods carrier is expected to commence commercial production in 2009. The company has also announced plans to produce a four-wheeler, "which will be a low-cost goods carrier and better three-wheelers than what we currently have," said Rahul Bajaj.
The company has three units - all in Maharashtra, at Pune, Aurangabad and Chakan - is now in the process of setting up its fourth plant at Pantnagar in Uttaranchal. The company is investing Rs 1,500 crore (Rs 15 billion) to take up its two-wheeler capacity from 3.5 million to over 5 million. Bajaj Auto had revenues of Rs 25,053 million in 2006-07 against Rs 18,592 million last fiscal.
The company already manufactures around 25,000 three-wheelers a month at its plant in Waluj, on the outskirts of Aurangabad.
For the export markets Bajaj Auto is targeting regions like Latin America, South East Asia, Africa, China and the Middle East. At present Bajaj Auto has a 32 per cent market share in India and is aiming for a similar target share of its overseas' markets.
The reasoning is based on the fact that 80 per cent of all two-wheelers manufactured globally are sold in markets outside India. Though Bajaj Auto already exports two-wheelers to Sri Lanka, Columbia, Nigeria and Bangladesh, it is now looking at consolidating its market share.
Bajaj is also contemplating entering the fragmented Chinese market where he might get in with a joint venture partner. Currently Bajaj Auto is working on a 150cc gearless scooter. Apart from the growth of the motorcycle segment, gearless scooters have become extremely popular among students and young people. According to the Society of Indian Automobile Manufacturers (SIAM), during April-August 2006-07, the scooter (75-125cc) segment, dominated by ungeared variants, grew 22.80 per cent to 314,459 units.
This segment is again dominated by Japan's Honda Motorcycle and Scooter India (HMSI), which registered a growth of 27.47 per cent, on the strength of its flagship Activa (102cc) selling 155,398 units during the period.
Unlike his flamboyant father Rajiv Bajaj is a recluse. He rarely meets the press and seldom misses his morning yoga. After work he would rather spend time with his family or go on long bike rides. He also takes a serious interst in homeopathy.
The biggest challenge for all two-wheeler makers is yet to come. This will be the Rs 1 lakh car from Tata Motor that is sure to hurt bike makers more than auto companies.
Characteristically Rajiv Bajaj is revving up by revamping manufacturing capability and R&D to give the country a four-wheeler with a Rs 1 lakh to Rs 1.5 lakh tag that will take the Tata car head on.