Rakesh Sharma, Executive Director, Bajaj Auto, talks to Autocar Professional on his company’s focus areas for the future and why it does not respond to aggressive pricing moves in the market.
23 Jun 2024 | 17001 Views | By Prerna Lidhoo and Ketan Thakkar
Bajaj has stayed one step ahead of its rivals by coming up with a differentiated portfolio of offerings and by exploring new markets and segments. As India’s two-wheeler industry undergoes a massive transformation with the entry of new players and a shift to EV technology, Rakesh Sharma, the company’s Executive ...
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Bajaj has stayed one step ahead of its rivals by coming up with a differentiated portfolio of offerings and by exploring new markets and segments. As India’s two-wheeler industry undergoes a massive transformation with the entry of new players and a shift to EV technology, Rakesh Sharma, the company’s Executive Director and one of the key figures in India’s two wheeler landscape, discusses Bajaj Auto’s strategy for the future, including its EV playbook, international expansion, and its plans for the Dominar and Pulsar brands.
Our aim is to create a sustainable position. Our intention is to build R&D, manufacturing, a vendor ecosystem, and a specialised distribution network. We’re not volumetric. This is a marathon. We’re not going to exhaust ourselves in the first year because there are people wanting to succeed with private investors, or who want to make a breakthrough. They’re driven by their own strategies, which is fine.
We’re driven by our goal of winning sustainably. It is not difficult for Bajaj Auto to cut prices and get volumes. But is it a long-term sustainable position? If it’s not, then there’s no point chasing it and making it a red ocean kind of a thing. We’re in the top 3 because it is important from a customer recognition point of view. But our focus remains on building capability – in R&D, manufacturing, vendor ecosystem, distribution and the brand.
As the market expands and some kind of equilibrium is reached, other players will also have similar strategic imperatives of not dressing it up. Most of the people have come to us to sell their company and I’m sure they have gone to other legacy players as well. The nature of the field right now is such that it’s not at an equilibrium. We’ll thrust forward as the equilibrium comes.
The most popular petrol scooter is sold for Rs 80,000. If someone rides for 30 kms per day, they save Rs 1,500 per month by switching to an EV, which is Rs 18,000 a year. Hence, even though the customer is paying a little bit more upfront, they’ll recover it within one year. Moreover, the vehicle is used for five years [generating more savings]. Therefore, about Rs 1,00,000 is a good price for an EV. The switch can happen at this price point. If you want to go above that, it’s not possible to sustain those kinds of prices.
The 125cc is quite a commuter segment. They’re not performance bikes and these bikes travel much longer distances. Even now, bigger wheel sizes are important given the state of roads. It’s too early to say it’ll shift to EV. The biggest cannibalisation is happening in scooters, especially for short distances. And some of the mileage bikes also. Customers think about EV as an option in this segment. It certainly has an appeal in this segment but for people who’re doing shorter distances. People who have planned visits and a definite pattern of commuting are most likely to adopt EVs first, especially the scooters.
Scooters are new for us. It is a brand new business which is coming to us. We’re charging ahead on the EV side. But all motorcycle buyers will not go to EVs, there will be some who are still mileage conscious. For people within the mileage segment who move unpredictably, and for longer distances, for them we have CNG. We will also do ethanol. We’re ready with E20. Hydrogen is also an alternative, but still far from commercialisation. Its application in India is in the commuter segment. But it’ll take time.
The jury is still out on whether you’ll be able to commercialise it at a small vehicle level. It is still in the R&D stage. Fuel cells have much better efficiency. It’s early days, and we have a lot to learn. At this stage, what we find interesting is that it’s an alternative technology. It cannot be ignored.
It depends a lot on distribution and pricing. The experience of Brazil is that maintenance cost increases and you have to continue to keep all versions on, E20, E85 and E90. The customer then takes a call depending on the pricing. We’re exporting E27 already. From an OE perspective, it’s evidently possible, because there’s nothing new [in terms of technology]. But it’s more of an infrastructure project and about adoption by the customer. Adoption means a change in behaviour. There is perhaps higher maintenance, costs of some parts, etc. So, it’s a very infrastructure-heavy project. Without a good line of sight on customer adoption, it’ll be difficult.
For the Pulsar franchise, it is going to be very good. This segment is not just about the volumes. As a company, we’re selling 4.5-5.0 million vehicles a year. Within that, this is going to be a very small contributor from a volumetric point of view. But from an image and a brand perspective, it will add a lot. The brand is on the move. There’s vitality in the brand.
With Dominar, we have the freedom to really take excellence to another level. With that, you’ll end up making a great bike but it may be out of reach for many. That is where Pulsar comes in (with a more accessible price). Yes, there’s a little bit of overlap from Dominar but that won’t affect us too much. For example, we will introduce the Pulsar NS400z in Brazil under the Dominar brand. Thus, we’ll have the Dominar 400 and the Pulsar NS400z in that market. It is also a little bit more mature than the Indian market. The whole idea [behind launching Pulsar NS400z in Brazil] was to give a very good street fighter.
You will find that as you go up the demand pyramid, the number of models increases. This is because the customer is a lot more savvy about making choices and has very specific personal requirements. For example, there are only eight or 10 models in the Splendor or Platina segments. You’ll be surprised to learn that the greatest number of models are in the premium segment. It can be further divided into the classic and the performance segments. The classic segment is home to a unique Indian phenomenon called Royal Enfield. And then, there’s the performance segment. You also have something like a Triumph, which is a modern classic. In the last five years, the CAGR in the classic segment has been 3-4%, but that of the non-classic has been 14-15%. That’s the space we’re getting into.
The classic segment is 75,000 [units/month] out of a million in which the sports segment is 30,000. But, classic plus sports-above-250cc has 25 models.
The penetration of motorcycles in India is still very small, at around 11-12%. Even in Nepal and Turkey, it’s double of this.
Similarly, the performance sports biking segment has a high penetration in most markets. But in India, it is only 3-4% of the total sales in the 250cc plus segment. Most countries, even with lower purchasing power, have penetration of 10-15%.
I expect it to do very well [in export markets]. By the time we do home locations, there is still some time for shipments, assembly, etc. We will get feedback in eight to nine months. That is a very long time-frame. Going by the Dominar sales which are higher internationally than in India, it’s expected to do very well. We’re exporting 3,000-4,000 units of Dominar per month. It’ll expand and do very well in Europe also. In Europe, the primary segment is 600cc, but now there are a lot of economic pressures in Europe, and a good, 400cc streetfighter bike should do well there.
No, in fact we are a highly focused company which is mainly into motorcycles and EVs now. And we’re very clearly in the 100cc-500cc and commuting-EV segments. Now within that, there are different technologies. For Dominar, also we are generally in the 500 cc range.
This year, we’re very close to pre-Covid-19 levels. The top half has reached it. Three-wheelers have reached it. The bottom half is showing good signs for the past two or three months. It’s a reflection of the recovery in the economy and money reaching the pockets of the common man. People who buy entry-level vehicles are making on an average Rs 30,000-Rs 35,000. It is also about a sense of confidence and job security. You can see that very clearly in the loan tenures that people are taking. They’re taking four-year tenures. That means there’s confidence. That’s causing the rise in the industry growth rate. Unless there is a black swan event, we should see 7-8% average growth with the top half growing at 11-12% and the bottom half growing at 5-6%. We may not surpass the 2018-19 peak because the prices have increased by 35-40%. We’ll come within striking distance next year.
This interview was first published in Autocar Professional's June 15, 2024 issue.