If a brand that contributes more than half of a company's sales faces a problem, then it could be worrying for the company. After a stellar show a couple of years ago, Bajaj Auto (Bajaj) is having difficulties realising a Pulsar-like success story for its Discover, even as competition hots up by the day.
The sales of bikes under the Discover banner, the most promising new brand from the Pune-based company, recorded a fall of 25 per cent last financial year, as compared to 2012-13. The fall was inspite of the motorcycle industry's growth of 4 per cent in the same period.
Bajaj Discover sales closed under a million units at 985,679 last year, compared to over 1.31 million units sold in 2012-13, according to data compiled by the Society of Indian Automobile Manufacturers. Moreover, Discover slipped to being fifth last year, from its perch on the third spot, the year before, among highest-selling two-wheeler brands.
The disappointing performance by Discover has cost Bajaj market share. At 14.55 per cent in July, Bajaj's share in the domestic motorcycle segment is at an all-time low. After sustained aggression, Honda Motorcycle and Scooter India (Honda) sailed past Bajaj to clinch the second spot in domestic bikes.
Rajiv Bajaj, managing director, Bajaj Auto says, "The 100-125cc segment is the biggest segment of the motorcycle market. Every company wants a slice and it has become extremely competitive. We have been under pressure for the Discover because of this".
With four launches in the entry segment (100-110cc) in quick succession, Honda has strengthened its share to 15.30 per cent in the segment (upto bikes with 125cc engine) by the end of the June quarter. The market leader, Hero MotoCorp, too, has improved its share to 63.2 per cent per cent in the same segment.
Bajaj has two models and seven variants of Discover that sell in this segment. Discover's share in the segment (below 125cc) has shrunk to just 7 per cent at the end of the first quarter from 13.5 per cent reported last year.
Initially relaunched as a 'Hero Splendor-killer' (referring to Hero's bestseller), Bajaj positioned Discover as a fuel-efficient model by launching the Discover 100, a 100cc, 4-stroke motorcycle that promised to return a sector-best mileage of 84 kmpl.
Buoyed by the 100cc success, Bajaj upped the ante to launch several variants and new models under Discover. These included three variants of Discover 100, four variants of Discover 125, a Discover 135 and even a Discover 150. Discover was first launched in 2004 with a 125cc engine, that was discontinued, only to be relaunched recently.
Bajaj's carpet-bombing of brand Discover, analysts fear, has confused buyers. It has driven them away from its showrooms. From being a worthy rival to the king of mileage, Hero Splendor, India's highest-selling motorcycle, to being a power-packed 150cc bike, the Discover tried to mean a lot many things to a lot of people.
Kevin D'sa, chief financial officer and president (business development), Bajaj Auto, has said in an analyst call, "To some extent we compounded the problem by launching several products of the Discover...And that's why the fundamental problem of the Discover is not quality...but it lost the position or what it stands for. So, if you ask the customer what does Discover mean, he does not know what it is".
However, the MD, Bajaj, challenges this theory, asking "when there can be so many variants of the (Hero) Splendor selling at the same time, why can't there be as many Discovers?" Hero retails six models of the Splendor, adding the latest one five months ago.
At Rs 53,074, (ex-showroom Mumbai), Bajaj recently launched the cheapest 150cc bike under Discover, which is aimed to strengthen the struggling brand and rake in volumes. It is about Rs 10,000 cheaper than the best-selling Pulsar variant, Pulsar 150.
"The new Discover 150cc may not be margin-accretive as the company has deliberately priced it very competitively to gain share despite new added features", says a note from brokerage firm Philip Capital.
The Pulsar, though, remains devoid of any such confusion, despite having five models. Positioned as a performance bike, Pulsar extends from 135cc to 220cc, retaining the tag of India's highest-selling premium brand. Pulsar's sales climbed 18 per cent in the April-June period this year, as compared to last year.
With the new launch, Bajaj may even look to reposition the Discover once again.
"The management realises that confused positioning (too many variants) has led to a dismal performance of the Discover range. It hopes to correct this by repositioning it as a 'commuter bike' at the premium end", notes a report from IDBI Capital.