Bajaj Auto, Triumph Motorcycles to firm up partnership agreement soon

The first Made In India Triumph model from the new venture is likely to be a 400cc motorcycle that will roll out of Bajaj's Chakan facility by the end of 2021

4 min read Last Updated : Jul 01 2019 | 1:42 AM IST

Two years after they announced a partnership to co-develop middle displacement (400cc to 700cc) motorcycles for India and neighbouring markets, Bajaj Auto and the UK’s iconic motorcycle brand Triumph Motorcycles are in the process of finalising agreements on production, investment distribution, marketing, and sales.

Albeit with differences, the broad contours of the agreements with Triumph will be benchmarked to Austrian bikemaker KTM AG, given that the latter has paid huge dividends to the partners with brisk volumes, market access, and cost benefits in its 12-year tenure. Bajaj, which holds 48 per cent in KTM, produces, sells, and markets KTM models in India, neighbouring markets, the Association of Southeast Asian Nations, and Africa.

“It was a creative exercise and we were challenged for ideas,” Rajiv Bajaj, managing director of Bajaj Auto, told Business Standard, pointing out that it had to be done in a manner that satisfied Bajaj and Triumph. “All outstanding issues are now resolved and both sides are more confident than ever before,” he said.

The first Made In India Triumph model from the new venture is likely to be a 400cc motorcycle, which will roll out of Bajaj’s Chakan facility by the end of 2021. Besides producing the bikes, Bajaj Auto will be also responsible for distribution, marketing, and sales of the motorcycles in India and neighbouring markets, including Sri Lanka, Bangladesh, and Nepal in the initial phase, followed by Africa, Latin America, and a few others later.

The partnership will help the two companies crack into the middleweight segment of the motorcycle market, which is currently led by Royal Enfield motorcycles. Royal Enfield makes 350cc and 500cc bikes and one 535cc bike. Bajaj makes one in that category — the 375cc Dominar — and Triumph none. Buyers in India have been uptrading to bigger motorcycles.

Through this deal, the duo is looking to hit the sweet spot of cost-competitiveness and pricing power. While Bajaj boasts a competitive cost structure through its economies of scale, Triumph, owing to its premium brand positioning, will have the pricing power.

A liquidity crisis which was exacerbated by Infrastructure Leasing & Financial Services, coupled with an overall economic slowdown, has pushed India’s motorcycle sales into the slow lane since last November. Domestic sales dipped to 3,364, 594 units in the first two months of the current financial year, from 3,809,459 units in the same period last year, according to the Society of Indian Automobile Manufacturers.

Bajaj Auto will create a separate vertical within the company for Triumph, which will be overseen by an official who will be appointed shortly at the president level. This person will be responsible for the entire gamut of operations, including production, sales, and marketing of Triumph models in the Indian subcontinent as Bajaj becomes the face of the British brand in the world’s largest motorcycle market.“It is very important to have an organisational focus, so that Triumph also gets the desired comfort,” said Bajaj, underscoring the strategic importance of having separate operations, independent products, and separate brand and retail identities for a new business. Earlier this year, Pune-based Bajaj Auto reshuffled its top deck, breaking it into verticals — one each for commercial vehicles, motorcycles, export of Bajaj branded products (motorcycles, three wheelers and quadricycles), KTM, and Urbanite (the unit that will roll out intracity mobility solutions). The move was aimed to lend dedicated management focus to each segment.

As it did for KTM, as volumes grow bigger, Bajaj will add to the existing dealer network of Triumph; it presently has around 15 dealers. KTM presently sells its models from 500 dealers in India. The company could have chosen the easier way and used the existing Bajaj dealerships to retail KTM bikes, but keeping the brand identities distinct was critical for Bajaj. He said both companies were very confident that the partnership will work out as the two came together with the intention of addressing a segment, which neither of them could have tackled on its own.

Therefore, the two started off with product development even before the contract was in place. To be sure, unlike its hugely successful partnership with KTM, the alliance with Triumph does not involve equity. So both companies had to ensure that they took the right steps to safeguard each other’s interests in each aspect, be it was Triumph’s brand or Bajaj’s long-term business interests.