An annual general meeting (AGM) of motorcycle specialist Bajaj Auto is incomplete without a discussion on scooters. Shareholders asking the senior management to reconsider its two-wheeler strategy has become an annual affair.
Despite rising demand for scooters, Bajaj Auto has resolutely opted to stay away from scooters while putting its entire resources to expand its motorcycle offering right from 100cc to 400cc and even beyond.
At the recently concluded AGM held in Pune company managing director Rajiv Bajaj explained to shareholders why Bajaj Auto does not play in the scooter market but instead focuses on the much bigger pie of motorcycles.
“No company can compete successfully in every segment. May be it sounds defensive to you, but let me give you two examples. Yes, it is true that Hero (MotoCorp) participates in scooters, but do you know that in a segment which sells 5 lakh motorcycles a month including the sports motorcycles and exports Hero does not have much of a presence there. TVS (Motor Company) participates in scooters but completely misses out on the middle motorcycle market which is worth 7 lakh motorcycles a month. Now both these markets are equal to if not bigger than the scooter market”, said Bajaj.
Unsatisfied shareholders insisted that they wanted Bajaj to regain the pride it had when it built and sold scooters under the Chetak and Super brands. But an undeterred Rajiv Bajaj provided another example to support his argument before signing off on the topic.
“I can assure you for any company, especially for us, to participate in every single segment. Best example of that is that of my friend Siddharth Lal (managing director and CEO and Eicher Motors which owns Royal Enfield)”, Bajaj said.
“He participates in almost no market and his company does very well in because it stays within its given niche of making a Royal Enfield as Royal Enfield should be. So I have only one request. Before you ask me again next year to make scooters can you please ask Siddharth Lal to make scooters? If he makes scooters I promise you I will also make scooters. Siddharth Lal makes 29% EBIDTA margin, perhaps even more because he does not make scooters”, added Bajaj.
After several quarters of scorching growth, scooter sales grew slower than motorcycles in the first four months of the financial year, as bikes made a strong comeback riding on rural demand and new launches.
According to data supplied by the Society of Indian Auto Manufacturers scooter sales rose 9 percent in April-July to 2.41 million units as compared to 17 percent rise clocked by motorcycles to 4.8 million units during the same period.During the same period Bajaj Auto domestic two-wheeler sales rose 35 percent to 7.95 lakh, more than double the growth clocked of 17 percent clocked by the industry. Bajaj has also improved its market share in the domestic bike segment to 16.56 percent as against 14.4 percent clocked in the same period last year.