Bajaj Auto aims for top spot in mid-market segment with ambitious product blitz

Bajaj Auto, a global two-wheeler and three-wheeler manufacturing company, on Monday (September 18) said the company is determined to secure the top position in the mid-market segment through a series of new product launches.

In an exclusive interview with CNBC-TV18's Parikshit Luthra, Rajiv Bajaj, the managing director, said the company is gearing up to introduce a total of six significant upgrades and fresh additions to their iconic Pulsar range over the next six months.

This strategic maneuver aims to not only fortify their foothold in the mid-segment market but also to propel their existing 30 percent market share to unprecedented heights.

A: By domestic I suppose you mean motorcycles. The entry segment which is the 100 CC motorcycle, continues to be under pressure for the industry as a whole. For Bajaj, this is not a major area of focus so in that sense, it's not a priority for us. The mid-market, which we define as a kind of 125 to 200 CC, typically ex-showroom price of Rs 80,000 to about Rs 1.7 lakh this is what is growing very strongly in recent times and this is where our focus has been.

Particularly with our brand Pulsar, I would say we have done rather well here with our product and marketing initiatives. Our market share has climbed steadily over the months to now you know around the 30 percent mark, we are the number two player very close to the number one in this mid-segment. And as you can imagine, this has been positive not just for our growth but also for our EBITDA. So that's one of the reasons why you could reel off some of those numbers on EBITDA etc. So, this will continue to be a very strong area of focus in the near term.

Finally, there is the premium segment, which we classify as being motorcycles of about Rs 1.7 lakh that is witnessing positive growth. So that's not negative like the entry segment, but not as big or as strong as the mid-segment. We have some brands like the Pulsar RS, the Dominar, KTM, Husqvarna, and now Triumph and I would say we are doing very well there, especially with the introduction of the Triumph.

A: It's impossible to forecast there are so many comments on this on both sides, for and against. But my own sense is that beyond looking at it quantitatively, one needs to look at this segment qualitatively. This is the segment of people at the bottom of the pyramid that have undoubtedly faced the biggest impact of COVID and the consequent actions associated with COVID and both in terms of real job losses and in terms of sentiment driven primarily I would say by petrol prices, this consumer is not coming back like the mid-segment consumer is or the cars consumer.

At the same time, we must also acknowledge that probably this is the consumer that is looking at EVs. So every time somebody buys an electric scooter and there are almost 60,000-70,000 of them being sold in terms of high-speed vehicles and perhaps many more in terms of low-speed vehicles those are not coming only at the expense of the ICE scooters that are also coming, I am sure at the expense of the ICE motorcycle. So personally, I really don't think this consumer is going to come back in the near future, certainly not in this festive season to where it was pre-COVID. And I think that if we have to make headway here, we need to do more than just hope for the consumer to rebound, we need some disruptive action in this space.

A: I would first like to start by saying that since we spoke in the last two, or three months, we have the new NS 160 and NS 200 there. We also have, in fact, this month, launched a new Pulsar, the N150, which we are very hopeful that it will bring us some great results in this festive season. We have got the timing, right, we think we have the product and the price, right? Between now and the end of the financial year, over the next six months, we will introduce six significant upgrades or new Pulsars, all aimed quite frankly, at further enhancing our share in this mid-segment, from 30 percent to as much as it can rise, we would certainly like to vie for the number one spot in this position.

And I can say that in terms of the question you asked, the direct answer will be this, for all the Pulsar fans out there, we have plans to launch the biggest Pulsar ever. Currently, the biggest Pulsar is 250 CC, the N250 and F250. But we want to launch in this financial year, the biggest Pulsar ever. We think we have a fantastic product to offer them. We want to do it within this financial year so that the full benefit of that in terms of growth and profitability is available to us next year.

A: That is correct so it's a total of seven, six plus the big one.

A: No, it's a little early for that maybe the next time we speak.

A: Premiumisation is now a way of life for all of us. In the 125 CC, for example, the reason we have had so much success is because with the various Pulsar’s we offered consumers have responded very favorably to quickly put us in a number two position with our 125 CC volumes being around 60,000 a month. Similarly, we just spoke about the 150 to 200 space where again, the Pulsar’s are doing a great job for us in the marketplace. But the most important action for us, and we talked about this the last time we met in July is going to be premiumisation in the premium space, which as I referred to earlier is the Rs 1.7 lakhs plus segment where so far, we have been clocking volumes of about 8,000 a month, between the Pulsar, Dominar, KTM and Husqvarna’s and we have about 8 percent market share. So over there with these two major interventions, on the Pulsar with the big one which will obviously be priced in that segment, and with the Triumph’s not only with the Triumph Speed 400 which we are currently making and selling but as you know from October we have the new Scrambler 400 and then the exports of Triumph will also kick in from October. So all this put together we are reading capacity for doubling our domestic volume from the present 8000 a month to somewhere between 15,000 and 20,000 a month so that we can be a strong number two player in this segment, in the domestic market.

Of course, Enfield with about 70 percent share currently is the number one and in terms of exports, we think we will be by far the number one player because currently our exports between the Bajaj brands and the KTM brands are about 10,000 a month and with the new Pulsar and the new Triumph’s we think we will again take exports to 15,000-20,000 a month. So all put together in the premium segment domestic plus exports, we are looking at about 35,000 motorcycles a month rate we would like to achieve by the end of this financial year.

A:  As you know, for the first 10,000 bookings, we had a special price of Rs 2.23 lakh, at some point in time, perhaps, four six weeks ago, and bookings exceeded 20,000 units. I frankly don't know where they stand today. But I do know we have switched to the new price. In terms of production and deliveries in July, I think we build about 500 vehicles or maybe a few more. In August, it was a little more than 3,000. So I would say between July and August, it will be about 4,000. I would imagine about half of that has been delivered to customers. The rest is either just undergoing final checks at dealerships or on their way, in trucks to dealerships.

In terms of this month, we are targeting to achieve something like 4,500. Quite frankly, we are limited by capacity right now, or I should say by the production of certain parts. In the near term, our goal is that in the month of January, as I said on the back of these three elements, the current Speed 400 the new Scrambler, and exports, we should be around the 10,000 mark. And that is a very nice place to be in this segment. It's very profitable, particularly exports at 3,000 a month, and with the Rupee at 83 is not a bad thing at all.

A: Clearly, the TVS price, by their own admission, is a price that makes the product very niche, especially in the domestic market. But of course, it's a great demonstration of their capability and their commitment. But I heard them say that their volume expectations are quite muted with this in the domestic market, I don't remember the number. As far as the Ola and Ather prices are concerned, our price is actually very similar to the Ather price. I think that is where the market is, that is where the TVS iQube is. My sense is that this is a price which we will have to make a big effort to make sustainable at least I can say that for Bajaj it is still not a price, which is very profitable.

When FAME goes away next year, we are all going to struggle to hold this price. But this is the price at which consumers are willing to look at the EV scooter as an alternative to ICE scooters and motorcycles. At a much higher price than this the interest fades away and that is evident from the fact that even currently, all said and done, the penetration is in the low single digits. I don't know about cars, I think it is like 2 percent or something, and even for two-wheelers I don't think it is much more than 4 or 5 percent.

A: So there is a kind of small picture answer and a big picture answer. The small picture answer is that yes, we did, I think we dispatched 8,000 vehicles after producing 7,000 in August. Hopefully this month, we can do better than that. If we can do 10,000 that would be nice to build up towards the festive season and certainly our own plan is to exit this financial year at something closer to 15,000 to 20,000. So we are putting capacity in place for that not just from our end but throughout the supply chain. We do have something on the product front also after the festive season to stimulate further demand, towards that goal of 15,000 to 20,000. So that will be the small picture answer.

In terms of the big picture, I think the way we are looking at it now and kind of carving out our plans for the future is that we are no longer just comparing Chetak volumes with those of its very obvious and immediate competitors. We have to look at the entire market of scooters which is say about 500,000 a month and also the entry-level motorcycles like we talked about the 100 CC motorcycle, which is also close to that number. So, we are talking about 1 million people out there every month, who should be looking at EVs for all that EVs have to offer. This is not even counting, the people who are buying today's low-speed vehicles that ply at under 25 kilometers an hour.

So, as an OEM that wants to be relevant to the EV future, one would target typically, if not 20 percent, at least 10 percent, as a minimum critical mass to be kind of competitive and in the reckoning in this segment. So, this means that we now need to think, not of 10,000 a month and 20,000 a month, but between Chetak and our partner company, Yulu we need to think about 100,000 a month and this is what is on our mind right now. So that's the big-picture answer.

A: So let me answer that in two parts. As far as our own sales vis-à-vis competition is concerned, of course, Ather and TVS have done a fabulous job, there is no taking away from that. Chetak, unfortunately, was always a little higher price. It was the most expensive of the four in the marketplace. We have been able to get the cost structure right off late and that is why you see a surge in our volumes. Also, we have chosen the route of not putting the Chetak into our existing Bajaj motorcycle dealerships, but rather into Chetak dealerships, and wherever that was not immediately possible, we have gone through the higher-end KTM dealerships, wherever it makes sense. It's not like in all 500, KTM dealerships you can find Chetak. So distribution has also been a little slow. But now obviously, with this interesting Chetak after the price has been corrected distribution is really being ramped up very significantly in these months.

So I have no doubt that between what we have done on price and distribution, Chetak will continue to grow every month. As far as the question on 100,000 is concerned, this is something that as a team, we have to get our minds around. We obviously need first and foremost product solutions for that, it can't just be a pipe dream. Our current capacity is about 14,000 a month between the Chetak, can Yulu. I would like to believe that for the next financial year, that is FY25 budget, when we present this to the board in March, we should have a plan in place to take the capacity to somewhere well above 40 and towards 100,000.

A: Exports immediately, no, maybe very selectively, where there are specific opportunities, such as perhaps in Sri Lanka, for example. But basically, the focus is on the domestic market. We have already introduced our product starting with the city of Agra in the month of May. And I am very happy to say that we did the right thing by waiting to get the product absolutely right, especially in terms of range because that is so important, obviously, to a three-wheeler operator. I believe in two or three months after launch we will be a market leader in that market with something like sales of 300 to 400 EV autos every month and a market share I believe in excess of 50 percent the last I heard of that since then we have expanded to some other cities and we are obviously going to roll this out first in cities that are ICE restricted. So we are not going to pan India right now.

Currently, if you look at what we did last month, it's closer to 1,500 e-three-wheelers between the e-auto and the e-cargo vehicle. And I am told by Rakesh and I believe he shared this on CNBC the last time he was there, perhaps he did that our near-term goal by which I mean, again within this financial year is to clearly be the market leader in this as we are overwhelmingly with ICE vehicles.

I cannot but mention that in the month of August, the team has done a great job of selling 50,000 three-wheelers in the domestic market, obviously, most of them ICE barring these 1,500 and we are hoping to match if not exceed that this month, which is again, excellent for our financial performance.

Coming back to the e-three-wheeler, this would mean that towards the end of this financial year, we have to get closer to, 3,500-4,000 records a month and then plan again for the next year to take it to the next level.

A: They have turned around especially the motorcycles and the three-wheelers are beginning to as well. As you know, typically, Bajaj Auto exported about 200,000 vehicles a month, before, export markets have run into the problems that they have. We fell to a low of around 110,000, maybe for a couple of months. Since then you have seen that in this quarter, we have come up to about 140,000-145,000. And again, as Rakesh had indicated 150,000 plus was on the horizon. Sitting here today, I would like to believe that is a number that we can achieve in October.

But I have to say that with the uncertainty still persisting in terms of forex availability, one can never be sure but we are very, very hopeful that in the next quarter, we will do better than what we have done in this quarter, which I believe is somewhere around 140,000 a month. So it has very much turned around and slowly and steadily we are gaining ground again over there. Of course, we never really lost market share so that's not a concern. But volumes are building up. But in the meantime, the rupee at 83 is certainly giving us comfort.

A: You would remember when we met for the Triumph launch, I was asked a similar question on the fifth of July. I said even then that it is the consumer who gives us the license to make some things or takes away the license.  It is not Rajiv Bajaj or Bhavish Aggarwal or anyone else in industry or government. So this is what I firmly believe. As for oats it's funny, it's something I said two years back and it is still hanging in the air. I must say this, I met Bhavish once I like his energy very much. So I have positive feelings for him. But I would say this not that sometimes. If you don't sound too good, maybe you have a bad foot from taking on too much ice. So be careful how much ice you take on at one time.

Q: My final question would be about alternate fuel vehicles. Union Minister Nitin Gadkari in a way nudged the industry rather strongly at the automotive convention the SIAM convention to phase out diesel. He warned that the government could impose higher taxes and then he said that there is no plan as such, but it was just a nudge in that direction, towards moving towards alternate fuels. How is Bajaj Auto embracing alternate fuels? You had been working on a portfolio and there were prototypes being worked upon? Is there something ready that you could unveil in the near future?

A: So I was not there at the convention, but I did read about this. He spoke about diesel, as I understand and diesel is not a big part of Bajaj Auto. We don't make any diesel two-wheelers. In our three-wheeler portfolio, say the 50,000 vehicles that I referred to that we made in August, I would think fewer than 10 percent would be diesel. I would like to say that what Gadkari said has sparked a very interesting thought in our minds because he talked about clean fuels, he referred to CNG. He referred to LNG, and I would well I would present this data to you that today 70 percent of the three-wheelers that we make for the domestic market are CNG and this was not the case just two or three or four years back, and since we are 80 percent of the domestic market this means more than half the three-wheelers being sold in India today as an industry, are CNG.

Now, I don't know what it is for cars and buses, but with all the communication I see from OEMs like Maruti and Tata in recent months, I get the sense that CNG is becoming really popular there as well. And I will also share one more insight with you that somebody very senior in government pointed out to me that they believe that one of the reasons why the e-three-wheelers are not more popular than they are currently is because the CNG three-wheeler is very, very competitive. So I would actually, really plug for a strong push on CNG, because the government is anyway, doing a great job of rapidly expanding the CNG network.

If I may say so I placed this before the FM and our team during the pre-budget discussion for the previous budget, that if CNG GST could be brought to something like 18 percent let us say, you know for petrol diesel, it's 28 percent for EVs, it's 5 percent if it could be brought to something like 18 percent that would really help. The CNG system cost as a percentage of a car cost may be very small, but as a percentage of motorcycle costs, or scooters cost is very large. So the very inspiring idea that was parked in my mind after what Gadkari said was this, why aren't there any CNG-scooters and motorcycles?

It would be great for consumers because it would cut their running costs by half. So it's like petrol becoming effectively Rs 55 a litre there would be no concerns about safety, charging range, battery life, etc, great for the manufacturer and great for the government because you make 18 percent GST so. So I will say that we talked in the beginning about some disruptive action to get the entry-level consumer going again, I think this would really galvanise them, if you know the government would consider some concession on CNG in terms of GST, and if OEMs would develop CNG scooters and motorcycles I think India can show a great example to the rest of the world once again.

A: I can tell you this, there is no CNG scooter on the cards. We are focused just on the niche area of the EV scooter. But of course, as a motorcycle maker, we are always looking at all such technologies. That's the diplomatic answer I must give you at this time. In the 125 CC and above space as I said, we are already doing well. We hope to do better with all the initiatives we discussed. But the 100 CC has been very elusive and who knows maybe a CNG Bajaj motorcycle that halves people's running costs would be the answer with a little help from the government.