As per the arrangement with KTM for the US and European markets, Bajaj only looked after activities like research and development (R&D), production and sourcing. The front-end i.e. sale and distribution was KTM's lookout. In India, however, Bajaj exclusively handled the job of establishing the brand. Following the success in India, KTM now wants Bajaj to follow a similar model in Indonesia. "In Indonesia, they want us to establish the KTM brand on the ground level and do it like "India". So, this is what is going to happen there," says S Ravikumar President-Business Development, Bajaj Auto in an interview to CNBC-TV18.In India, which is one of the fastest growing markets, the company has already done a good job of establishing the KTM brand, said Ravikumar.Indonesia, being the biggest motorcycle market in South East Asia and a strong market for high-end two-wheelers, holds a big potential for the company, said Ravikumar.As of now, the only presence of Bajaj in Indonesia is in the three-wheeler space and it sells 2,500-3,000 three-wheelers a year there.
Below is the verbatim transcript of S Ravikumar's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: Tell us what is the current run rate of Pulsar that are sold in Indonesia and how has the agreement with Kawasaki helped improve the traction in the Indonesian market? A: The market is a big market and we have been attempting to establish Bajaj Pulsar in that market for the last few years. We did try that by ourselves and afterwards with Kawasaki with joint branding for Pulsar. There are some markets we have come to recognise where the state of economy itself has moved up in the ladder and the auto and two-wheeler revolution is at a much mature stage. We also find that the Japanese makers have worked in those types of markets for five-six-seven decades. They have established their presence very nicely. In these types of markets we have to find a nice business model to get into that area. Like product-wise that is never the issue that our research and development (R&D) can deliver, our supply chain and factories can deliver, but how to make things work in these types of markets, this has been a puzzle that we have been trying to crack. However, because you asked me what is the run rate of Pulsar and things like that, once we found that things are not going according to plan and we put an end to the earlier formats and now we are trying to create a new format in this agreement with KTM.
Latha: What are you making in Indonesia now? In FY16 how much money did you make and how much do you expect to make in FY17?
A: In our exports of three-wheelers is continuing there with old distributor and we are able to sell around 2,500-3,000 units a year and that is at a good EBITDA, normal plus EBITDA from Indonesia and that is going on quite okay. However, coming to motorcycle, we are practically at zero as far as Indonesian market is concerned. Now we are trying to establish a new way forward.
Sonia: What is the expected run rate as far as motorcycle sales is concerned in Indonesia and what is the total share of exports that will come in from the South East Asian market over the next one to two years?
A: The background is KTM and Bajaj's collaboration in the backend meaning R&D, production, sourcing and cost efficiency that has proved itself from 2007 onwards very nicely. When it comes to the frontend, KTM has taken these joint products from here and they are happily able to sell in many markets like Europe and advance markets like US etc and that is going on nicely.
In India the entire job of establishing the KTM brand was given to us and we have done a great job. They are happy about that. We have almost about 250 odd specific KTM branded stores in India and India is one of the fastest growing markets. They have also attempted a few of the emerging markets by themselves taking joint products and getting into Columbia etc, they have done well.
In Indonesia, they want us to establish the KTM brand on the ground level and do it like "India". So this is what is going to happen there.
Latha: You will build on to other South East Asian countries?
A: They are already doing well by themselves in a couple of countries there, for example in Cambodia, they have done well and there are few wide spaces there. So those things may come in future but we have to go step by step. However, the high-end market in Indonesia has been growing. The motorcycle segment has been about 1.1 million type of units a couple of years back; it has shrunk by 25-30 percent but despite that shrinkage due to various reasons within the total portfolio the high end has doubled in the last three-four years. So this is where we see a good opportunity for the KTM brand and this will show the way how to establish ourselves in these types of Japanese strong markets.
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