Q: What are the key growth drivers for the company in Q2, the stock has performed exceptionally well, what are some of the growth drivers you see, and the drivers that you will continue exploiting in the coming months?
A:
We acted upon the Chetak, which was the ICE Chetak at that time. But in the sense that we stopped making scooters in our endeavour to focus on being a global motorcycle company. We expanded our three-wheeler not only in terms of distribution but also on the back of new technology at that time, particularly for CNG. Because it was led by Sheila Dikshit in Delhi who wanted, Delhi to be cleaner. And then finally, of course, that was the decade when we commenced on our export journey. I mean, in 2001, our exports were close to zero and 10 years later, they were probably I mean, I don't know, maybe half a million or a million a year.
The reason I give you these five data points is because I think what has gone right for us in recent years is exactly more of the same. Once again, the Pulsar in its new avatar is doing really well. This time as opposed to KTM we also have Triumph joining us. The Chetak is back in an electric avatar. The three-wheeler again on the back of CNG and now the electric three-wheelers is really doing well as you know, and finally, exports after having dipped a little bit slowly coming back and as you know, we are the largest exporter out of India. So I think we are firing on all these five cylinders again simultaneously and that is perhaps what the market is appreciating.
Q: How has been the festive season for Bajaj and how do you expect the company to do domestically in Q3 also because of the wedding season?
A: So, as far as the festive season is concerned, let me tell you vertical by vertical our domestic motorcycle vertical for the Bajaj motorcycles if I compare the October-November period this year with the same period last year because that would be a fair comparison then overall, the Bajaj motorcycle growth is about 20% in retail terms. But within that, the mix is very interesting. On the 100CC, which has seen a lot of discounting in the marketplace, not by us, we are actually down 10% year-on-year. So we have a de-growth of 10%.
But in the 125CC plus area, which we like to refer to as the sports motorcycling area, and which is the area of our focus. Believe it or not, our growth is as high as almost 50% year-on-year, so that's how the blended average comes to 20% or 22%. Obviously, this is very good for us because that's the area of our strength, that is more the EBITDA supportive area, if not the EBITDA accretive area. And that is where our focus will continue to be.
On our pro-biking vertical which handles KTM and Triumph also we have similar like 50% growth, which is to be expected because there was no Triumph last year. On the Chetak we have moved very strongly in the last two months from number four to a pretty strong number three position. If you look at the Vahan data now as of today, you will see that we are close to 15% market share, which was only about 5% just a few months back. So Chetak has done really well for us.
On the three-wheeler, we have had two months of record-breaking sales in the domestic market exceeding 50,000 a month. I personally never thought that in my tenure at Bajaj, I will ever see the three-wheeler selling 50,000 a month for almost 80% market share. And on the exports also we have some cheer because typically before the kind of crisis in several global markets, we used to export about 200,000 units every month, these are dipped to almost 100,000, come back about 130,000-140,000. And I think now we are going to see 150,000 or 160,000. So, again very good news on all the five fronts in the festive season. I think this is going to continue for the rest of this financial year in a similar fashion.
Q: Let me also ask you about the Triumph. You sold about 8,000 units of the Triumph in q2 How do you see the production ramp up the sales footprint of the Triumph motorcycles now, you have got a Scrambler also in the market.
A: So we are taken a little bit by surprise, I must admit, we had prepared ourselves for 5,000 a month because primarily the market leader there Royal Enfield is a very tall and very deep brand. And all of us have tried over and over again in recent years, but nobody's really been able to make an impact. So our initial capacity, as I had shared with you previously was for 5,000 a month. And yes, last quarter we have done I think 8,000 totally. This quarter, I think we should more than double that to about 18,000 which means an average of 6,000. So out of a capacity of 5,000 a month, we will hopefully be able to squeeze out 6,000 Triumphs on an average every month this quarter. Not easy with all the Diwali break, etc. And that is a mix of both domestic and exports of both the Roadster and the Scrambler.
Going forward, obviously, the next stop should be 10,000 a month and I think we are looking good for that. I must say that apart from expanding capacity we also have to expand distribution because as Triumph has its own exclusive network. We inherited about 14 or 16 dealers from Triumph. I think we might have about 75 dealers now versus let us say 1,000 for Royal Enfield or 800 for Bajaj, so we still have a long way to go before we establish the required distribution footprint. So as capacity and distribution expand, I think we will see this number expand.
Q: I would like to ask you about ramping up sales of the Chetak as well. 7,261 units in October; 11% market share for Bajaj currently, how are you working to increase the market share here onwards and some of the strategies you would be deploying?
A: Well, as I said, we are now averaging about 15% market share at Vahan level. I suspect retail market share is a little ahead of that, as you know Vahan takes a few weeks to catch up with the retail data. So the retail gives us a lot of confidence. We are now averaging about 10,000 a month on average. Again, we were constrained by capacity. And I guess the next logical step for Chetak is I would say 20,000 a month for let's say 20% share, you know so 2020 should be the next stop for Chetak.
How are we going to do this? Well, the old-fashioned way, we have to again, like Triumph, we have to expand production capacity, which will be done within this quarter to the level of 20,000. We have again an exclusive network for Chetak and we have to grow that network and we are working on that. There are still some large markets where we are underrepresented and finally, there has to be excitement for the consumer. So I am happy to say that very soon, by which I mean as soon as perhaps next month, you will see some new products in the marketplace, under the Chetak brand. So certainly that should further intensify demand and hopefully from January, both in terms of capacity and distribution we are able to do something more than 10,000 a month and we are on our way to 20,000 a month.
Q: So by the end of Q3 you are seeing that you would have a production capacity Have 20,000 units for the Chetak?
A: That is correct.
Q: In terms of taking the market share, currently, you've got Ola which is at about 35%. When do you think you'd be able to probably reach a higher market share in the range of 30%?
A: Ola was down to 30% already in October I think if you look at the data, again, I am talking about the Vahan data which is available to anyone. If you look at the recent Vahan data as of like yesterday, or day before, the data that I saw suggested that the top three players had a market share of Ola 23%, TVS 20%, and Bajaj at 15%. So I think the top three are now pretty close. Of course, this can change there is so much activity there in the market in terms of new products, in terms of prices changing, etc. So it could go either way. But as of now, this is how the three stand in the marketplace.
Q: In terms of exporting the Chetak, taking it to global markets, what's the plan?
A: Quite frankly, I think Rakesh is in a better position to answer that and since he's been away from for a bit, I am not updated on that. I do know that he has two or three markets in mind. I don't think anything is concluded yet. But I will say this, that India is the most important market for electric vehicles of this kind, particularly. I mean, I don't know if you are aware of that apparently, China sold 59 million electric two-wheelers last year, but then a lot of them were the small, cheap kind of stuff that I don't think we really want to see in this country. So stuff that is of the standard of the Chetak, by which I mean, the design standard, the quality standard, and the service standard for which the Chetak is being appreciated today, India is the most important market. So quite frankly even if we just focused on this market for the next five years, that itself would offer tremendous growth for this brand.
Q: So no immediate plans for exports?
A: No.
Q: Let me also speak to you about your CNG strategy. In September, you hinted to us that you are working on a CNG motorcycle. What is the current status of that plan, of that pilot, because there have been reports that you have you been testing this and could be possibly launched next year. Could you give us a sense of the CNG plans?
A: So yes, it's no secret that we are working on a CNG two-wheeler and apparently the prototype of the motorcycle has been spotted. I haven't seen those details. So I am not going to comment on that. As I had shared with you, this is something we thought of recently and as the proto itself would suggest in case that is authentic, we are in very early stages of the game. So what I am prepared to say today is that this is not something we are about to launch in this year or something like that. But I am prepared to say that within the Calendar Year 25, which means within the next two years, we would certainly hope, I will not say we have decided to, but we are very hopeful of launching this motorcycle and let me tell you why primarily.
There doesn't exist a CNG two-wheeler in the world today to the best of my knowledge, unless there is some jugaad stuff happening somewhere as there is in India also. I am told people retrofit CNG onto their scooters and motorcycles. And there is very good reasons for this and let me give you four of the top reasons. The first three have to do with emissions and hence with your health and my health. Let us start with carbon dioxide CO2, which as we know is very important for global warming. Now, when we made the prototype and compared the CNG motorcycle with the ICE motorcycle, the petrol motorcycle, there was almost 50% reduction in CO2.
Next carbon monoxide which we know is very hazardous for human health, there is a 75% reduction in carbon monoxide and finally, in terms of non-methane hydrocarbons, obviously with CNG that is almost zero so, in fact, there is a 90% reduction. In terms of the operating costs, which is of course more important for the Aam Aadmi customer if I call him that, then is the emission consideration for better or worse, there is almost a 50 to 65% reduction in the operating cost in terms of the fuel bill. So it's it's effectively like saying petrol instead of ₹110 a litre is suddenly going to become ₹50 a litre. And I think the proof of the pudding is in what has happened in the three-wheeler industry. Of course, CNG has become very popular even with cars and buses, but especially so with the three-wheelers.
Q: So I would quickly like to confirm you said you are working towards a commercial launch in the 2025 Calendar Year for the CNG motorcycle?
A: I said before the end of the 2025 Calendar Year.
Q: Bajaj Auto must be doing market studies, what is the demand for CNG motorcycles in the market? Because people have traditionally bought petrol motorcycles, now, customers are moving towards electric vehicles. What do market studies really reveal?
A: It's very hard to do anything more than speculate. But let me give you a somewhat longish answer to this. Let us take reference of the three-wheeler market, which is as close as we can get to the two-wheeler market right now. You may be surprised to know that with the government's initiative in rapidly expanding the CNG pipeline in recent years, and that's one wonderful thing I would say the government has done as far as the auto industry is concerned. Today, almost 60% of the three-wheeler industry has moved to CNG with the commensurate benefits, as we just spoke for the environment and also for the operating costs for the driver and for the customers. And within the Bajaj portfolio and we just finished saying how well Bajaj has been doing with its three-wheelers, you know, 70% of what we sell today passenger and cargo put together is CNG. So that is one data point.
As far as the two-wheeler industry is concerned, or let us take just the motorcycle industry because that's what we are working on pre-COVID, our industry used to be about a million a month, now it is between 800,000-900,000 so we are still not come back to the pre-COVID levels and I will come back to this point in a second. If you were to apply 70%, to that, that would be a huge number. But I'm saying even if 10-20% people would consider CNG, you are talking of a very large number of motorcycles, you are talking about probably 200,000 motorcycles every month at a 20% conversion. But here I must make two important points if you will give me two minutes to do that. And that is I want to make a statement that our industry - two-wheelers in this country has really suffered in recent times, not so much because of the COVID lockdown, not so much because of commodity pricing reasons, not so much because of the chips and chips shortage as it has for the fact that it is over-regulated and overtaxed.
By over-regulation, I draw your attention to the fact that I have been saying this for last 3-4 years now and I believe I have heard Venu Srinivasan sir say this, that in terms of the regulations brought in for emission, safety and insurance, it has pushed up the cost of an average motorcycle by about 35%. Today, our safety norms in terms of mandating ABS or emission norms in terms of BS-VI put us squarely on par with European norms. Now, that's good, I mean, if we want to benchmark the best in the world and be there, no problem. I mean, we have the technology to do it, we are a global player, but then we must also understand that there is a huge commercial implication of that on what is essentially the vehicle of the Aam Aadmi for his daily commute and to earn his daily livelihood. And that brings me to the point of this being a heavily over-taxed market.
The third biggest two-wheeler market in the world after China and India is typically Brazil. You will be surprised to know perhaps that just as our GST is 28% it is only 9.25 in Brazil, the next biggest market is Indonesia, it is only 11% in Indonesia, in Philippines which is not as rich or poor market as ours, it is only 12%. In Malaysia and in Vietnam, it is only 10% and in Thailand we all love Thailand, so in Thailand, it's only 7%. So, very clearly the Aam Aadmi in India is being made to pay on an average I would say about 15% more in taxation terms, than his counterpart in all of these economies, which I think are very comparable to us.
So, I think that what is very important is that when new technology is introduced, whether for safety or emission, or say in this case CNG at the same time, we need to relook at the GST structure. If we want industry to grow, if we want India to continue to be a powerhouse of two-wheelers in the world, and if you want employment to grow.
Q: Coming back to the importance of CNG motorcycles for your portfolio, how much are you investing currently in having a CNG portfolio in the two-wheeler segment?
A: The honest answer is that I don't know, because I said that our work has just started. So what demand should we anticipate, what share for ourselves, what make by policy we will follow, hence what investment we will make? I think it's too early to answer these questions. Right now we are focused on getting the product right.
Q: In terms of how it would contribute to your revenues, the kind of portfolio mix that you are looking at, how many CNG products would you like to have and what would be the sales mix that you're working towards?
A: Well, in terms of revenues, again, as I said, it's too early for that. But I would put it like this that if we can have 20% penetration through CNG two-wheelers let us say, in a couple of years after they are introduced, and that points to say 200,000 units a month or thereabouts and typically in this space, we have 40% market share. So let us say arbitrarily, we will have share of 80,000 vehicles a month, which is a million vehicles a year, multiply that by a price which is likely to be around a lakh of rupees, let us say. So it points to a potential revenue stream of 10,000 crore a year.
But I would say this is all pie in the sky at this stage, it is not easy to package a large CNG cylinder in a two-wheeler, especially in a motorcycle, which has no space actually, unlike a scooter under the seat. So there's a reason why there doesn't exist a CNG two-wheeler in the world as of now. In a three-wheeler, in a car or bus that challenge doesn't exist. So again, we have to first get the product, right and then we will know better about the cost and price and potential volumes and revenues.
Q: The final question on the CNG front, there have been reports that you would like to probably bring this in the 150 CC, bringing it in Pulsar, would that be your aspiration?
A: Obviously, I am not enough of a rookie to give you a straight answer to that. But I will say this, that I believe that with new technologies, whether it's electric or CNG, it is important that it is not just the technology i.e. the product that is new, but it should also be the position or the brand also that is new. And that is why for example, when we have brought the Chetak back after 15 years of burying it, so to speak, we have brought it back in a pure electric car. And a lot of people tell me that side by side, why not also have an ICE Chetak? And I just think it will take the charm away from it.
Imagine a gasoline Tesla standing next to an EV Tesla I mean, it just sounds like a very corrupt thought. So in the same way, my first instinct would be to say that if we are going to introduce the world's first CNG motorcycle, hopefully, TVS is not going to beat us to it I would like to think that we will create a new position with a new brand rather than leverage one of our existing brands.
Q: What would be your aspiration currently in terms of revenue and profit margins over the next few years with the old motorcycles, the ICE portfolio continuing and the new generation electric vehicles, CNG and other fuels also coming in?
A: I can't give you again a quantitative answer to that but I will share one thought with you qualitatively largely, which is this that India used to be the early 90s a scooter country so to speak. 70% of the market was scooters and then for reasons of fuel economy because motorcycles, four-stroke motorcycles especially were much more fuel efficient than scooters were, the country became a 70% motorcycle market. Now if we are going to go down the EV route, and there is so much uncertainty as with FAME and PLI and so many other things, but let us assume for a moment that EVs are here to stay and they will grow. So far penetration you know that penetration is only about 5% with two-wheelers and perhaps 1% with cars. But if we go down the EV route, then really there is no advantage left. No significant advantage left with motorcycles as there is in the ICE world because whether you are a scooter or motorcycle with the same EV drive train, you are going to have the same cost the same range, the same charging time, etc. So abroad. So, okay, some people will prefer motorcycle for the larger wheels or just for the feeling of being on a motorcycle.
But I think in this case, it would not be entirely incorrect to hazard that India could go back to being 70% is scooter country and if that were to happen, then the revenue opportunity for a company like Bajaj and a brand like Chetak is enormous because then it means that Chetak and of course, we could add other brands to it, I can share with you that we are going to work on electric KTM scooters and Husqvarna scooters, hopefully not in the very distant future, but for the moment we will stay with what is real and tangible, which is the Chetak that Chetak alone could become as it was once as bigger company if not bigger than what Bajaj Auto is today. So Bajaj Auto today is on the threshold of becoming a ₹50,000 crore company by revenue because that's the question that you ask, with the 20%, EBITDA I see no reason why in principle, that should not be true for Chetak or that should not be a real possibility for Chetak let us say in the next few years.
Q: Make in India initiative, which began in 2014, do you think we have reached a breakthrough moment when it comes to Indian manufacturing and has India's image shifted from a mere consumer market to a global manufacturing powerhouse?
A: Well, I am not sure exactly what the question is, but I will try and answer it in two parts. First of all, as far as being a manufacturer is concerned in India, I would simply put it like this that what is important to us is that as a manufacturer, is simply the ease of doing business. As I have said to you, once in the past, the five L's of land, of labour, of legislation, of logistics, and electricity these are the five basic elements and then there are some more. I would only say that when I compare with the ease of doing business, in some of the other global markets of ASEAN, or Latin, I do feel that we still have a long way to go. Particularly if we are referencing becoming a powerhouse, as you say, then that implies we must be best in class and we are certainly not best in class.
We were challenged, even before 2014, when there was no cry for Make in India. I mean, our journey as a global motorcycle maker, as I told you started from around 2002. So we didn't wait for anyone to tell us to 'Make In India', we were proactive about it. But with the ease of doing business before 2014 after 2014, at least from my perspective, is no different, it's largely the same. So that is as far as being a manufacturer is concerned.
But in terms of what I would like to read between the lines of your question is that from going from being merely a producer to kind of becoming a provider of a global brand, I think there is a growing sense of confidence, there is a growing sense of awareness. I certainly would like to believe Bajaj has done its bit for that. Today we are in almost 90 countries, in many of them, we are the market leader. In majority of them, we are either number one or number two. In Africa for example, across the continent, one out of three motorcycles is a Bajaj motorcycle. Bajaj exports, or sells its half of all KTM sold worldwide, and exports them to US, Europe and Japan. So I am sure there are so many others I mean, I don't want to make this a sales talk for Bajaj, there are so many other Indian companies who are similarly doing great work not only in terms of product but in terms of brand, which means you sell in your name and you sell with pricing power across the world. So I think that shift has certainly happened in the last few years. But again, we have a long way to go and here the responsibility lies not with the government it lies with the companies with their management and with their strategies.
