Bajaj Cranks Up Dealer Cut, Adds Rider

In a bid to increase its market share in motorcycles, Bajaj Auto has decided to increase the dealer margins by 50 per cent. The move, the company expects, would help it in increasing the sales of motorcycles from an average of 35,000-40,000 a month to around 55,000 a month.

Rajiv Bajaj, president of Bajaj Auto, said: "At the moment, the margins we give our dealers is 5 per cent on a motorcycle, this we are increasing to 7.5 per cent on the condition that dealers would sell between 30 per cent to 40 per cent higher than their existing targets."

Bajaj points out that considering the fact that the company has around 20 per cent market share there is need to incentives dealers if they have to sell more.

"After all they have to incur extra expenditure it terms of more salesmen, more sub- dealers and so on. So we have to give them something more," he said. The new dealership margins would be introduced all over the country. It will have a three- tier structure with margins going up according to how much the dealers exceed their targets. Points out Bajaj: "Unlike in scooters we do not have a dominant market share in motorcycles and that is what we are aiming at."

However, market leader Hero Honda seems unperturbed at the latest ploy. "Margins is only one source of revenue for the dealer.

He also makes money from sale of accessories and spares as well as servicing," Hero Honda senior vice president (marketing) Atul Sobti. Hero Honda typically offers dealers a flat margin of Rs 1,500-2,500 on every motorcycle depending on the model. Sobti said that the company has no plans to change it after Bajaj's move.

Bajaj's competitors point out that the hike in margins had become necessary to counter the impact of discounts offered by Bajaj Auto on the profitability of its dealers.

Meanwhile, in a major thrust to expand the market Bajaj Auto has decided to increase the size of its dealer network by around 25 per cent per annum.

Its target is to appoint 100 new dealers in this financial year taking the number if dealers from 400 to 500 . The company also plans to increase the number of sub-dealers by 50 per cent annually. The target this year is to have 1,500 sub-dealers.

Of course it is clear that Bajaj does not plan to increase dealer margins for selling scooters. That is because it already has a large share in the total market in India and does not see a strategy based on margins would help in increasing volumes.

Bajaj has also worked out an alliance with Kawasaki to manufacture and export motorcycles in the below 150 cc category.

At least 20 markets, primarily in Latin America and Middle East, have been identified by Kawasaki where Bajaj will hawk the products.

Bajaj expects to initially export 1,000 bikes a month and increase the numbers to 5,000 a month in the next six months.