Don't get success by doing more: Rajiv Bajaj

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Don't get success by doing more: Rajiv Bajaj

The 44-year-old managing director of Bajaj Auto, Rajiv Bajaj made one of the most remarkable turnaround in the history of corporate India. He brought his company back from the brink onto a recovery path. A lot of the turnaround had to do with the indigenous R&D that was developed and also with some fairly radical decisions.

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The 44-year-old, managing director of Bajaj Auto , Rajiv Bajaj made one of the most remarkable turnaround in the history of corporate India. He brought his company back from the brink onto a recovery path. A lot of the turnaround had to do with the indigenous R&D that was developed and also with some fairly radical decisions.

On CNBC-TV18, Rajiv Bajaj says he is confident the company will achieve 20% growth. He asserts on the philosophy of 'less' being 'more', He says "Compared to previous years, where one has seen far more activity, where one goes out and announces improvements every month, it would appear that two launches a year is too less. However, we have learned the hard way that even in this industry less is more."

He believes the market for a product is essentially contra-intuitive. "If we were competing only for India, I would make everything. If I was competing for Asia, I would make scooters and motorcycles, and if I am competing for global dominance, I must run deep in one area - hence, focus on motorcycles," he feels. 

Commenting on reports that the budget could see an excise duty on motorcycles to grow on 10-12%, he says, "My consumer has already seen it -onions at Rs 80 per kg, potatoes at Rs 60 per kg, petrol in Pune now at Rs 63 a litre. For him, that is far more difficult a situation to deal with than Rs 1,000 one time. So I don't think that is going to affect anything." He also believes that the market alignment of the product is the crux of it's success.

Below is a verbatim transcript of Rajiv Bajaj's interview with CNBC-TV18's Senthil Chengalvarayan. Also watch the accompanying video.

Q:  From the dumping of the scooter to moving away from the 100 CC motorcycle market and developing the motorcycle on your own and selling them; the change is radical. When did you realize that the era of the scooters would over?

A: The shift away from the scooter to the motorcycles started in early 90s. Progressively every year, the market shifted some more and it didn't happen overnight. Companies like Kinetic or LML that stayed with scooters are history today. They couldn't or didn't make the transition away from scooters and hence, didn't survive. Similarly, other than Hero Honda that has a strong position with 100 CC bikes, the companies like Bajaj, TVS, Yamaha, Suzuki, and LML tried to make a business out of 100 CC motorcycles and fell as well. They may have sold a few but not profitably so.

So, the fact that people were moving away from scooters was evident to everyone. What was less evident was how we are then going to continue to be in business because that meant developing and being successful with motorcycles. There were not too many answers around for that question.

Q: You know the company and the industry is doing well. However, you have said that, "India's markets are not just under penetrated but also under segmented. They are underestimated, in terms of their potential to be the center of gravity of the world for many businesses in the future." How do you in Bajaj hope to exploit the opportunities of the under-segmentation of the market?

A: Fundamentally, we believe in the principle that markets will continuously evolve. As Darwin said, "As the world evolves, the species must adapt". In the same way, as markets evolved, we need to adapt. Unfortunately, Darwin didn't tell us what we have to adapt. In the 60s and 70s, in that stage of evolution of the market, Chetak offered a value benefit equation and it got right at that time.

The markets have evolved considerably since then and as the market evolved, a species splits into two and further into two and into another two. As the market will segment, manufacturers must create categories that mirror that segmentation. So, that is what we have been doing.

The one size fits all approach of being a Bajaj doesn't work anymore. The market is not that homogeneous anymore. There is a market for sports motorcycles for which we will focus on Pulsar as a brand. There is a market for a sporty commuter that is where we have a Discover. There is a market for the utility bikes especially in the African markets, we have a Boxer and for the niche markets, we went and we acquired a large stake in a company called KTMA in Europe. So, we are hoping that these actions of ours to create unique brands for specific categories will address the evolution of the market.

Q: The scooter segment made a come back. Will you get back in scooters because we see TVS, Honda making scooters and selling all that they are making?

A: We focused on the largest chunk of the market, which were scooters. My father put all his resources behind that created the perception that Bajaj was a specialist of scooters and that seemed to work. So, I am just following his act, motorcycles is 80% of the market. We are putting everything behind that since it is not the time to bet on multiple horses. We have to do one thing and we have to do it right.

During my father's time, the market for Bajaj Auto was India. For my colleagues and for me the market is the world. The bigger the market that you want to address, the narrower the focus has to be. It is contra-intuitive - if we were competing only for India, I would make everything, if I was competing for Asia, I would make scooters and motorcycles, and if I am competing for global dominance, I must run deep in one area. I must focus on motorcycles.

Q: What is your plan for KTM? You have recently hiked your stake in the company to about 36%, why do you need such a large share in a company that could be providing only technology?

A: There is one major benefit each that we hope both for KTM and for Bajaj. For KTM -they have a fantastic brand, great technology, they are the world's offroad racing champion for the last eight years, and they have tremendous pricing power in the market place. So, everything is right at the frontend. Their problem like that of any niche maker is that they don't have the economies of scale at the backend.

So, what we are working in the direction to develop common platforms for KTM motorcycles and our own Pulsar motorcycles. This may benefit from the economies of scale that the Pulsar has. It will substantially improve the cost structure of the backend and with the pricing power at the frontend. KTM will be an enormously profitable company. So, that works in it for KTM.

As far as Bajaj is concerned, we did not do this from a technological point of view because we started the development in March of 2008 and we will be in production in April 2011. So, if we can be in production in 2011 with all new KTM motorcycle that was designed out of here, it shows that Bajaj always had the technology to put it out.

In one word, our entry strategy in many Japanese dominated markets of the world is KTM. Today markets like Brazil, Thailand, Malaysia or some of the markets of Europe, Australia etc are a promising market for Bajaj Motorcycles like Pulsar and Discover. However, the Japanese makers are deeply rooted in these markets and I don't think we will be very successful in a reasonable period of time trying to take them on by ourselves but KTM provides us that route.

Q: What does this partnership with KTM mean for your partnership with Kawasaki? Is that slowly going to ebb away or is that going to continue in some form or the other?

A: As of now these are two very different partnerships because with KTM we are focused more on markets like US, Europe, Japan, Australia as I was mentioning, Brazil etc, where KTM is or can be strong and Bajaj can take advantage of that. With Kawasaki, we are working more in the Asian markets. In India, we are their distributors for their bikes. In the Philippines, they are our distributor. We are the number one motorcycle brand in the Philippines as Bajaj but we sell through the Kawasaki network. So, Kawasaki and Bajaj are working more in the Asian markets whereas with KTM we work in other markets.