Bajaj Auto may not be best placed to make most of EV opportunity, says Rajiv Bajaj

Bajaj Auto's Rajiv Bajaj on Thursday said that we may be at the cusp of a big disruption in auto space with the onset of electric vehicles (EV). Not just that, he said the existing Bajaj Auto may not be best placed to make the most of the EV opportunity and the auto major needs to prepare and get ready for a major e-mobility disruption that lies ahead. Warning further that the cost of missing the EV bus could be very high, Bajaj said the board has granted approval for the formation of a 100 percent subsidiary for EV.

In fact, the two- and three-wheeler major has begun its EV journey by relaunching the Chetak scooter in an electric avatar has now formed an electric vehicle subsidiary. The company says the field is wide open, and it would explore the two-wheeler, three-wheeler, four-wheeler, and hybrid space. There is also a plan to expand the presence of Chetak from three to 25 cities by year-end.

Bajaj said the board granted approval for a 100 percent subsidiary to be formed for the purpose of electric vehicles. The idea for this is not born out of thinking about some mission for the future, but rather by observing and reflecting on the past.

“Between the 60s and the 80s. Bajaj Auto was an extremely successful manufacturer of scooters, almost entirely for the domestic market. And then as you are aware, very rapidly from the early 90s, the market began to move to motorcycles. And not just motorcycles, but a very different genre of motorcycles in terms of technology, design, etc and it's no secret that Bajaj Auto struggled to make this transition. So even though it was the number one player in the market with its scooters, it was always for fourth in a field of four when it came to motorcycles,” Bajaj told CNBC-TV18.

By the end of that decade, Bajaj Auto's two-wheeler business actually lost money and the only reason the company as whole did not lose money was because the three-wheelers held up the bottom line, and we had no exports at that time, he specified.

“It was in 2001, Bajaj Auto 2.0 was born with the launch of the Pulsar in November 2001, to be precise, and that changed everything for us and from there on, we went on to become a motorcycle company, essentially,” said Bajaj, adding that they now export half of what they make and are now the ‘world's most valuable motorcycle company’.

The Bajaj Auto MD said that when they reflected on the past as to why they failed to make the transition in the 90s and then in the nick of time, were able to haul out of trouble — it was based on this learning that they thought of creating a new entity with its own identity.

“Once again, we may be we are not sure about this, but we may be on the cusp of a big change, almost a disruption. Once again, 30 years later, what changed from scooters to motorcycles, a very different kind of motorcycle, may change to electric very rapidly over the next years, and once again, it is not just the technology that may change, but everything around it -- not just the design, not just pricing, but it is the business model itself that might change,” he said.

The current management at the company may not be best placed to reap the EV opportunity, said Bajaj.

“With a sense of humility, we are saying to ourselves, that maybe the existing Bajaj Auto, as defined first and foremost by its existing talent may not be best placed to make the most of this opportunity. What I mean by that is, first of all, at the operating level, quite clearly from R&D, through operations to marketing, the people that were good to make. Vespa scooters have a certain vintage were not up to the task of making Japanese motorcycles of the 90s. So this could be true once again,” he said, adding they may need a different kind of talent across functions, to do justice to the challenge of electrification that we think lies ahead of us, maybe even in the top management team.

“I would say candidly, maybe ‘we’ including ‘me’ are not necessarily the most appropriate top management to lead this company forward into the electric space,” said Bajaj, adding even in terms of the board, even in terms of partnerships.

According to him, what happened in the 80s – Bajaj Auto had the opportunity to partner for scooters and motorcycles in the 80s but that didn't happen.

“When I joined the company in 1990s, soon after that, we had an opportunity to partner west for scooters, and three-wheelers, that didn't happen,” he added.

He said, sometimes the existing company is not just short on talent, but its own success becomes a hurdle in striking the right partnerships and that can also prove to be very expensive, not only partnerships with other OEMs, but with all kinds of players that will exist in the electric ecosystem.

“This is the helicopter view or the macro view, looking down from which we felt that perhaps the best thing would be to create a new entity, which gives us the flexibility to bring in the talent we need to all the way to the top to strike the partnerships we need, to have the right board composition in place, etc. Right. So that we are not left behind in this transition as we were almost left behind in the last one,” he explained.

When asked if he meant this is the beginning of Bajaj Auto’s journey to redefine itself for the future -- the future, which could be the electric future, have other technologies and whether they would be recruiting top-level people for this new entity. Also how much investments, yearly capex would go towards electric vehicles?

He said, “I would put it like this direction that we have two jobs on hand. The first and the more important job is to defend the success we have. As I said making 5 million vehicles a year we are the most valuable motorcycle company in the world and both in terms of motorcycles and three-wheelers. We have some very strong brands in our portfolio, which are strong in the domestic and export markets. We are not a startup that can ignore our present business. So we have to do full justice to that business, including electrification of those brands.”

So if there is going to be electric Platina or Pulsar, or a three Wheeler tomorrow, surely, Bajaj Auto is going to electrify its current brands, its current portfolio, he added stating that they have to defend the success they have created, although not defend in a negative sense, but in the sense that we have to build on that further.

: Bajaj Auto likely to lose 50% of domestic sports motorcycle volumes in September: Rajiv Bajaj

“At the same time, I think we need to acknowledge that there is also something to be said about attacking, as opposed to just defending about creating something new, a new business model, a new company, a new brand, maybe, or a new brands, maybe just with a new talent from top to bottom, if need be a how that will go is anybody's guess.”

According to him, it is not always the incumbents who are getting

off the block the fastest. In a worst-case scenario, the cost of making a mistake by creating a new venture like this, to my mind will be very small compared to the cost of missing the bus again, as we almost did the last time.

He further said, “On the 20th anniversary of the Pulsar, in November of this year, we are poised to launch the all-new Pulsar platform, which will of course, start with the biggest Pulsar we have ever made. I won't say exactly how big and then of course, that platform will, over the next 12 months work its way down all the way to the smallest Pulsars that we make. So, so, that is our biggest product move in the near future.”

Also Read: Bajaj Auto bets on new Pulsar platform; Rajiv Bajaj says Chetak supply getting better

Talking about their EV three-wheeler plans, he said,” I can answer that in two parts - first, think of a matrix in terms of two and three-wheelers on one axis and personal and commercial vehicles on the other axis. So, if one thinks of this two by two matrix, then we intend or our product plan has been put together to develop brands in all these boxes. So, we will have two-wheelers which are for personal use and commercial use and that is no secret with our partner, Yulu the micro-mobility leader based out of Bangalore. Similarly, in the three-wheeler space, we see an opportunity for both personal ownership of electric three-wheelers not of the kind of form factor obviously that one sees in the garb of the auto-rickshaw, but something refreshingly different and of course, the existing auto-rickshaw must also be electrified,”