A rough ride to the future

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With TVS overtaking Bajaj to claim the third position in the two-wheeler category (TVS Motor sales exceeded Bajaj's figures in the month of June and the April-June quarter of 2014), it has become necessary for the latter to take a hard look at where it stands. The company's decision to exit the scooter segment, say experts, could be a major reason why it has shed considerable market share. What Bajaj needs urgently is a counter-attack to get back into the game, argue our panel of experts

For sheer profitability, Bajaj is still the envy of others: Hormazd Sorabjee

BAJAJ is a formidable brand and the company's bottomline continues to be healthy. In fact, booming exports have given the company a windfall last year with rupee depreciation and profits from three-wheelers continuing to be juicy.

However, credit must go to TVS for overtaking Bajaj to take third spot in the two-wheeler market, for TVS's success in the scooter segment and the success of the Star City plus, a 100-110-cc commuter segment bike. Crucially, for the scooter segment and the mass commuter segment, Bajaj doesn't presently have many answers. However, it needs to look at what it wants to achieve. Of late the company has been focusing on premium, higher profit and high performance bikes, that has, in some ways, shifted its concentration away from the mass segment - be it scooters or the 100-cc commuter bike category. Bajaj Auto, which revolutionised the two-wheeler market in the country through its 'Hamara Bajaj' campaigns in the 1980s and 90s, exited the scooter segment in 2009 even though it has maintained that a comeback might happen.

Though motorcycles still account for the lion's share of the country's annual production of over 14 million two-wheelers, scooters have been consistently growing rapidly at 20 per cent. While a host of manufacturers threw their hats into the ring with the rapid growth of scooters, Bajaj felt it wanted to concentrate on dominating one or two categories rather than participating in all.

In the mass commuter segment, Bajaj's Discover brand is in need of tweaking. It requires a 'wow' factor in branding that will allow it to gain consumer traction. Though the company has been smart in creating multiple models with same engine configurations to cater to customer requirement for exclusivity and good styling, excellent mileage and aggressive pricing, the slew of upgrades and newer versions of the Discover have often left customers confused, especially since many older versions of the Discover continue to sell and haven't been discontinued. Also, with the Discover, Bajaj tried to position it as the champion of fuel efficiency, which didn't work as expected, with Hero and Honda retaining a strong grip on that segment.

Honda remains a clear scooter market leader, with its strategy in the motorcycle segment being to gun for the rural segment, doing more launches in the economy segment to increase market share. While Bajaj has maintained that its goal is to be the global motorcycle leader (revenues through exports point towards a successful strategy in this case), it needs to plug certain gaps in its product portfolio to find more buyers. However, for sheer profitability, it is still the envy of others and perhaps the main reason why it hasn't joined the low margin, high-volume race.

Hormazd Sorabjee
Editor, Autocar India

Playing the volume game will be key: VG Ramakrishnan

Here's what you need to understand about the two-wheeler segment landscape in a market like India: it has seen quite an increase due to factors like women work-force, education (with more students going in for two-wheelers) and as such scooters, mobikes, have not seen a de-growth of any kind. In fact, it is this landscape that offers opportunities for companies in this segment to further grow the market.

If that is the case, why are some companies losing market share in the business? As true of any other category or industry, we need to look at why market leaders gradually lose market share - new competition comes in, investments in research and development by rivals increase, understanding of the market segmentation by others gets better, leadership gets better. The way out: always evolve, always understand what customers want, whether you need to increase and develop product portfolio. Additionally, companies in the two-wheeler segment in India need to continuously communicate with their target customer. Even if the focus is the rural market, what marketing strategies can be worked out? Can social media be a communication channel in those markets? Can design of the vehicle be fine-tuned? Is getting out of a segment a wise decision? Can we get back in? These are hard-hitting questions that some players need to urgently answer if they want to work out a counter-strategy to succeed and get back in the game.

An emerging market like India offers a lot of opportunity for companies in the two-wheeler segment but what companies require to excel at is putting together a good product portfolio. That's the key strategy for expansion, getting customers and revenues. I think the problem happens when companies, even as they continue innovating, stop realising just when and how products stop being irrelevant. And when they do spot the problem at hand, they fail to realise how new segments can be tapped, introduced and grown. A robust product pipeline can always help a company bounce back in the number game; lack of it can be damaging.

Volumes are of immense importance in two-wheelers and it could be important for companies to be present in various segments where customer traction can happen. A missing segment in a portfolio could mean losing out on customers.

VG Ramakrishnan
MD, South Asia and Global Co-Leader, Automotive Practice, Frost & Sullivan

Bajaj needs product development and line diversification: Amit Kaushik

In October 2013, when TVS Motors launched its new family man scooter Jupiter, nobody had even imagined that in less than three quarters, the product would play a crucial role in helping the company grab the third slot in the Indian two wheeler industry by dislodging Bajaj. The 'Zyada Ka Fayda' ad premise seems to give the automaker an edge over rivals.

In recent times, there has been a significant shift in terms of the overall expectations of the middle-aged (30-40-year-old) two-wheeler consumer; there is a substantial chunk of this segment, especially from urban areas that wants its vehicle to be multi-purpose and prefer buying a scooter compared to bikes. TVS Motor understood this changing buying behaviour and positioned Jupiter to cater to the expectation of this emerging base of consumers.

On the other hand, Bajaj ruled India's scooter market for years before the automaker made an exit from the segment a few years ago to focus on motorcycles. Though the company is doing well in terms of the exports (being the largest 2-wheeler exporter from India that also occupies a leading position in several overseas markets) but again, there are quite a few challenges like the hike in interest rates in several countries, increase in import duty in Sri Lanka, trade restrictions imposed by Argentina etc. Despite the recent challenges in the local market, Bajaj Auto continues to explore further geographies such as Africa and Latin America. It is one of the most profitable auto makers in the world - exports account for nearly 40 per cent of its overall production.

Bajaj already enjoys great reach, brand perception and loyalty. All it needs is product development and product line diversification.

Amit Kaushik
Principal Analyst (Auto), IHS Automotive