New Delhi: Bajaj Auto Ltd, which got back into the market for entry-level motorcycles nine months ago, is making some headway against rivals such as Hero Honda Motorcycle Ltd, the country’s largest two-wheeler maker.
Hero Honda has been able to maintain its top spot largely due to its dominance of the segment—motorcycles with engine sizes between 100cc and 125cc, comprising 70% of motorcycle sales. Its mainstays—the Splendor and Passion models—are the country’s top-selling motorcycles.
Bajaj withdrew from the 100cc segment in 2006 because it wasn’t able to make a dent in the market, having depended for too long on the popularity of its scooters, which fell out of favour with consumers moving to motorcycles.
“The CT-100 (motorcycle) was selling at a Rs4,000 discount and at those prices, it made little sense to persist with the product,” said S. Sridhar, chief executive officer (two-wheelers) at Bajaj Auto.
Graphic : Yogesh Kumar/Mint
The company, which made its re-entry with the 100cc Discover last July, appears to have got its strategy right this time around, winning market share from Hero Honda and TVS Motor Co. Ltd. Bajaj’s share rose from 7.5% in June to 20%, while Hero Honda’s fell from 84% to 68% in April.
“The numbers speak for themselves,” said Naveen Matta, an auto analyst at Ambit Capital Pvt. Ltd. He estimates that the company sells 75,000-80,000 units of the entry-level Discover a month.
Hero Honda, which reported a million unit sales in each quarter last fiscal, said it maintained its 59% share of the domestic market last fiscal. “We have a slew of new launches lined up, which will help in further consolidating our leadership,” a company spokesperson said.
While working on the Discover, Bajaj knew it had to give customers a reason to shift away from their Splendors. “In this segment, customers usually use their bikes for seven-eight years, and there is little resistance to change,” said Sridhar.
So the company added a longer wheelbase, a five-speed gearbox usually found on performance bikes and an air-filled nitrox suspension, again a performance-bike feature.
That convinced customers they were getting more for their Rs42,000 (at which 100-cc motorcycles are largely priced). What added to the charm was the Discover badge, which was associated with a higher-end 135-cc bike that retails for Rs50,000. “They’ve done small, smart things like offering the self-start option as standard fitment, something that’s not there on the Splendor,” said Matta.
Bajaj also took the battle into the rural areas, a traditional Hero Honda stronghold. Sridhar says that 40% of the Discover’s sales come from such areas. In comparison, Hero Honda sells 42% of its motorcycles in rural areas.
Besides this, in the past year, it has raised the number of service centres to 4,500 from 2,500 and is now present in towns with a population of 10,000. Traditionally, two-wheeler makers have restricted themselves to towns with a population of 200,000-300,000.
Each of the 465 Bajaj dealers is responsible for sales in a region and has appointed “command area managers” whose only job is to spread the Bajaj brand through word of mouth.
Bajaj has also tried to drum up demand by tying up with Bajaj Auto Finance Ltd to help customers get loans for their vehicles, even those without bank accounts, who can pay their instalments in cash at around 800 service centres. Around 23% of Discover sales are through loans.
Banks are reluctant to lend to two-wheeler buyers as default rates average as high as 20% in some areas.