On a Friday morning, at his corporate office in Akurdi near Pune, Bajaj was relaxed, calm and composed as he spoke about the Bajaj-Triumph alliance, his association with John Stuart Bloor (chairman Bloor Holdings, which owns Triumph) and the road ahead for the motorcycle and three-wheeler businesses. Edited excerpts:
What is the rationale behind the non-equity alliance with Triumph? Your partnership with KTM Powersports AG, in which you own 48%, has paid off handsomely and you have a readily available war chest.
If you look at the first major partnership with Kawasaki, we didn’t have equity collaboration, neither was it with Kubota Corp. of Japan (that powers Bajaj’s diesel three-wheelers). Both the companies are still with us without equity, but most of the other equity partnerships in India in the two-wheeler segment have ended. So actually, equity doesn’t guarantee anything. We had put in Rs1,200 crore in KTM in fiscal 2008-09, bulk of it after the global financial crisis. Today it’s worth Rs7,000 crore. I tell people I am not Rakesh Jhunjhunwala, his job is to buy equity, mine is to make motorcycles. This (the equity in KTM) was just a collateral effect—if they didn’t need the money, we would not have bought into them.
Triumph is a family-owned company. John Bloor (chairman, Bloor Holdings, which owns Triumph) is a self-made person. He bought the almost defunct brand in 1983 and kept investing into it for a decade. The motorcycle rolled out only in 1991. From there, it started. When I contacted him in 2007—I contacted both KTM and Triumph around the same time, he just told me, “I like you and will come to you at an appropriate time." I thought it was a polite way of saying no. I must give him full credit. After 10 years, he did not contact anybody else. This is called ethics and value. Then it took us six months to finalize the partnership. A man like Bloor doesn’t need any money and we have enough, we have Rs13,000 crore, don’t know what to do with it.
The important thing in a partnership is mutuality—there should be some big reward. Together, we should be able to make hundreds of crores and millions of pounds, we have proven that with KTM. Second, there should be reciprocity—give and take. Our partnership with Triumph is based on the triangle of mutuality, transparency and reciprocity. I have found if these three things are taken care of, the partnership is very stable. There’s no need for equity as a fourth leg but equity is not a negative. If tomorrow Bloor says can you invest in Rs3,000 crore, I will be fine with it.
Bajaj Auto has ceded ground to rivals in the domestic market and volumes, particularly in the commuter segment, have been under pressure. What do you attribute this to?
Overall, we look at our market share, we hit the bottom of 14% in January 2015. In December 2016, we went from a market share of 14% to 20%. It was largely driven by the commuter segment.
It’s important as we gained six percentage points within a year in a segment where the average share of companies, with the exception of the top two, is 6% or less. Therefore, from January to December 2015, we did rather well. We would have gone further from there. But we were hit by two things—first was the transition from BS-III (Bharat Stage-III) to BS-IV (Bharat Stage-IV). We did the right thing by having the more expensive BS-IV range ahead of time. We went out of the way to say manufacturers shouldn’t be allowed to sell anything which is not BS-IV after 1 April. The courts went in our favour. It is estimated that in the last three days of March—between Honda Motorcycle and Scooter India Pvt. Ltd, Hero MotoCorp Ltd and TVS Motor Co. Ltd, they had put in 800,000 motorcycles in the market and offered huge discounts. We offered (discounts), after everyone else. But whatever we offered was on a very small number of 10,000 to 15,000 vehicles as we had practically no BS-III vehicles. Other manufacturers, by their own, admitted to this. One of them said on 1 April, “We have cleared 400,000 vehicles." Suddenly, if you put 800,000 vehicles in the market—which is a month’s sales—in just three days, at a discounted price, people will advance purchase. That is why our sales, from April till now has been falling.
But why have we seen only Bajaj sales fall?
They had been offering discounts to liquidate their stock so what they are showing today are sales from the company to the channel and they are restocking. So to put it simply, they spent hundreds of crore in the last quarters of fiscal 2016-17 to buy market share for first quarter of this year. If I spend the same amount, I can also show sales, but the question is whether your priority is sales or profits. Therefore, because of these factors, we have again slid from 20% to 16% (in market share).
Our sales have started improving from August onwards and September will be better subject to everything remaining fine. Over and above this, there’s a role to be played by the new products. Last month, we launched the new CT (100cc motorcycle). This month, we will launch the new (refreshed) versions of the Platina (100cc motorcycle) and the V (150cc motorcycle).
How do we see volumes panning out in the export market which too had its share of woes lately?
Three out of four—exports, three-wheelers, sports segment and commuter segment—cylinders are firing for us now. One is exports. Bajaj has suffered the most in exports as we export 40% of what we make and there has been some problem or the other in every other export market including Sri Lanka, Egypt, Bangladesh, Columbia, most of Africa, Nigeria for the last couple of years. Luckily, things are normalizing now. From August onwards, we are seeing volumes pick up. If it continues, and we are hoping it will, we should soon reach the level of 1.7 million-mark very soon.
What lies ahead for the three-wheeler business and the commuter and sports motorcycle segments?
In three wheelers, a few good things have happened. One is our new range has been well accepted last year—both petrol and diesel. Secondly, in Karnataka, one of the biggest three-wheeler markets, diesel has been banned. It’s good because we are very strong in LPG (liquified petroleum gas), CNG (compressed natural gas) and petrol. Thirdly, some of the states like Maharashtra have issued fresh permits. As a result of all this, we have sold 29,000 three-wheelers last month.
The third cylinder is the sports segment in the domestic motorcycle market. With the Dominar, new Pulsar NS , we are doing very well.
The last cylinder, which is not fully firing yet, is the commuter segment. But now with the new CT, and the new Platina, the new V, that too will happen. Thus, by the end of the second half of this year, we will have all four cylinders firing.
The Dominar (the middleweight motorcycle) sales have tapered off after the initial peak and the monthly volumes are lesser than company’s 10,000 units target.
Our target was to do 10,000 units a month within the first year of launch; we are still four months away from that. The year is not over yet. The targets we give are always inclusive of exports. We should be reaching 6,000-7000 units a month very soon. In that segment, with that price point where Honda has failed, TVS has not entered, and Royal Enfield has huge headstart over us. Being a new brand, if we are already at 4000 plus and will soon be able to sell 6,000 to 7,000 units a month—this achievement within a year of launch, I think we are doing great. And we are not selling it cheap—it commands the same price as others. That’s the number Enfield was doing five years back. That means, if they have a 50-year history I would say, we have caught up with 45 years in one year’s time. While the model will be readily accepted in the exports markets owing to our strong presence, it will take time for it to make its mark in India owing to competition from a brand that has a longer history. It will also go to several European countries. While we have been exporting to Europe, it’s the first time we will be exporting in volumes to so many European countries. It will go to nine countries including Poland, Spain, UK, Czech, and perhaps even Australia—where we have not been selling. So definitely, Dominar will open up lot many more advanced markets for us.
Why has Bajaj not been able to launch the Qute (quadricycle) in India yet? Where’s it held up?
It’s stuck at the government. The Supreme Court, by removing the stays granted by some courts, has allowed the vehicle to be sold in India. But If I have to sell, it has to be registered at the RTO (regional transport office) which will happen only when it gets a road worthiness certificate by ARAI (Automotive Research Association of India). ARAI is controlled by the ministry of road transport and highways. MoRTH have to come out with updated BS-IV specifications—based on which ARAI will certify. But things haven’t moved for some unexplained reason, so the Qute which is already selling in some of our three-wheeler export markets, will now make its way into rest of the markets as well.