Bajaj Auto: Yesterday no more

Bajaj Auto will not sit on the fence anymore. Reduced to the fringes in the scooter market, the company would often tell investors, analysts and inquisitive journalists that a brand new strategy is in the works. But it stunned the world recently when it announced that it will exit the market. The Kristal, its last scooter, will not be made after March next year.

Bajaj Auto Managing Director Rajiv Bajaj said this will help the company focus on motorcycles, which of course is a much bigger market than scooters. And analysts say the switch does make sense. “The company will not have to use its two-wheeler assembly lines for scooters and will neither invest in this range. That means, more motorbikes manufactured and more research & development on them,” says Angel Broking Senior Analyst (auto) Vaishali Jajoo. Bajaj Auto, in other words, will now be able to focus on motorcycles.

But scooter is not a dead market. At one time, not so long ago, Bajaj Auto was the undisputed leader of this market with brands like the Chetak. But when consumers began to switch to fuel-efficient contemporary bikes, it abandoned the space. It was a miscalculation. In the last few years, the scooter market has revived with the advent of the gearless variety. Could this be another wrong call?

Industry experts say there are two reasons for the resurgence in scooter sales: One, the fuel-efficiency of scooters has improved significantly in the last few years; and two, maintenance on scooters is low because these are driven largely by women. Over a million scooters were sold in India in 2008-09. And the projections are that the numbers could double in the next five to six years. It has attracted the likes of Honda, TVS, Suzuki, Hero Honda and now Mahindra & Mahindra. Even Yamaha, it is learnt, wants to join the bandwagon.

Bajaj had become a small and insignificant player in this market. In the eight-month period between April and November 2009, it sold just 3,356 Kristal scooters. Overall scooter sales, in fact, rose 15 per cent to 891,303 in this period. In November, in fact, only 154 Kristal scooters were sold and a little over 100 were exported. Honda has a dominant 55 per cent market share, followed by TVS Motors with 19 per cent and Hero Honda with 14.5 per cent.

But none of this seems to have bothered Bajaj Auto. The company wants to triple its motorcycle volumes from the current three million, capture a larger share of the global motorcycle pie (30 million per year now) and become the world’s largest motorcycle maker. That will involve taking on Hero Honda. The decision to get out of scooters is ground preparation for the final assault.