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Last Updated : Oct 18, 2019 02:50 PM IST | Source: Moneycontrol.com

Scooters: The one thing Rajiv Bajaj could not say no to

"I will manufacture scooters when Royal Enfield will produce scooters"

 
 
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As a ritual, almost every shareholder who gathers at the annual general meeting at Bajaj Auto’s Akurdi headquarters in Pune makes a plea to the senior management to reconsider its renunciation of scooters.

After all, it was the understated scooter that laid the foundation for Bajaj Auto for over two decades. The company gave it all up later in pursuit of becoming a specialist in motorcycles.

Chairman Rahul Bajaj, who turned 80 this year, has been an open critic of his son Rajiv’s policies towards scooters. The younger Bajaj considered scooters to be a hindrance to the company’s goals of becoming the biggest global manufacturer of motorcycles.

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“I feel bad, I feel hurt,” the octogenarian entrepreneur told PTI in an interview in 2009, two years after Bajaj Auto rolled out the last scooter Kristal from its production lines. Since then, the company has been producing only motorcycles with engine capacity 100cc to 790cc.

At the peak of their dominance in recent years, scooters commanded 33 percent of the Indian two-wheeler market, having grown from just 15 percent five years ago. In FY18, growth in scooters outpaced motorcycles, bringing further flak to Rajiv.

Of the total two-wheeler sales of 21.18 million units in FY19, scooters made up nearly a third at 6.7 million units. Japanese heavyweight Honda controls 55 percent of the scooter market, followed by TVS Motor Company with a 19 percent share. Despite its massive retail reach, Hero MotoCorp has just 10 percent share in scooters.

While shareholders and analysts tracking the company criticised Rajiv’s long-term strategy, which overlooked the growth opportunities in scooters, he has been busy furnishing explainers at every AGM and press meets.

“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 participates in scooters, but do you know that in a segment which sells five lakh motorcycles a month, including sports motorcycles and exports, Hero does not have much of a presence there. TVS participates in scooters but completely misses out on the middle motorcycle market, which is worth seven lakh motorcycles a month. Now, both these markets are equal to if not bigger than the scooter market,” said Rajiv at the 2018 AGM.

Rajiv even went on to promise shareholders that when Eicher Motors-owned Royal Enfield forays into scooters, Bajaj Auto would follow it. “Siddharth Lal (MD of Eicher Motors) earned 29 percent EBIDTA margin, perhaps even more because he does not make scooters,” he stated.

However, the company's AGM in August missed out this crucial tradition. Not one shareholder made the scooter plea to the management, and coincidentally this anomaly happened in the very year that Bajaj Auto unveiled a scooter.

The company showcased a battery-powered Chetak on October 16, announcing its re-entry into the scooter space after about two years of development. The fully electric premium two-wheeler will go on sale in January. Rajiv will closely track the responses for the e-Chetak (to be launched only in Pune and Bengaluru initially) before making further strides in this segment.

Since Bajaj Auto is chasing a differentiated and premium positioning for the electric venture, close on the lines of Tesla, future products from the company could be in the premium range. A good illustration is the company’s joint work with KTM, where both companies are working on electric motorcycles. For now, the younger Bajaj has held his cards close to his chest.

Why scooters?

With the launch of an electric scooter, critics would argue that Bajaj Auto once again did a strategy U-turn (the earlier one being its return to the 100cc motorcycle segment). Rajiv though defended the move.

“Getting into electric is inevitable, but it is also a niche segment just like three-wheelers and quadricycles. I want to make the product irresistible, which will force people to buy even if they don’t really need it,” said Rajiv at the Chetak launch.

For the company having an electric scooter is safer than having an electric motorcycle. This is because a performance-focused bike could disrupt Bajaj Auto’s petrol-powered bike range. But an e-scooter will only bring in incremental volumes as there is no chance of cannibalisation.

“We felt the obvious choice for an electric foray would be the scooter as it was a no-conflict situation. With more EVs I sell, I will lose volumes in some other segment. Our specialisation in motorcycles very neatly sidestepped conflict," said Rakesh Sharma, Executive Director, Bajaj Auto.

Upcoming years could see the debut of several electric vehicles from Bajaj Auto, but the management resolutely promises no slowdown in the pace on new fossil fuel-powered bikes either. Petrol-powered motorcycles under four distinct brands -- Bajaj, KTM, Husqvarna, Triumph -- will make their way to showrooms, most of which will be designed, developed and manufactured by Bajaj Auto in India.

The 2018 Bajaj Auto AGM brought out the colour and legacy of the Bajaj group.

“Some of my colleagues told me that maybe he (Rahul Bajaj) will retire if I make a scooter,” Rajiv told shareholders. “It is such a special occasion that we can’t make just another stupid 100cc scooter. I think we should make a Rolls-Royce on two wheels, an outstanding scooter which does not exist anywhere in the world.”

He then asked the shareholders two questions.

Rajiv: “Should we make such an outstanding scooter?”

Shareholders: “Yes”’

Rajiv: “And if we make such a scooter, should my father retire?”

Shareholders: “No”

Rajiv: “I knew that.”

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First Published on Oct 18, 2019 02:26 pm
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