Two Wheelers – Is Bajaj Auto losing out on the domestic game?

When Bajaj Auto announced its global tie-up with Triumph International of UK, it was not just a strategic link-up. It was also a tacit admission by the company that it was rapidly losing its market share in the domestic market. The Triumph deal will enable Bajaj to manufacture Triumph motorcycles in India using its low-cost skills. It will also ensure Bajaj’s presence in the entry level, mid-level and the premium segment of two-wheelers. But there is a bigger story behind this…

Dropping to Number 4… 

When the recent monthly numbers for two wheelers were announced, Bajaj was clearly in the fourth position in terms of domestic sales. To be fair, Bajaj derives nearly 50% of its revenues from the export market and only 50% comes from the domestic market. Still it is hard to fathom that Bajaj has fallen behind Hero Moto, Honda and TVS Motors in terms of domestic sales. This was unimaginable even 20 years ago. When Hero Honda overtook Bajaj couple of decades ago, Bajaj was still a prominent second. With the split between Hero and Honda, Bajaj had been relegated to 3rd place and has now ceded the third spot also to TVS Motors. Probably, Bajaj continued its focus on scooters for too long and also did not get its motorcycle positioning too granular. The Triumph deal is Bajaj Auto’s attempt to reverse the pecking order in the two-wheeler segment.

Week export markets… 

The export market, which had been Bajaj’s defence against domestic competition, too has been under some kind of strain. Unlike other auto players, Bajaj’s output is equally distributed between the domestic market and the export market. Two things have worked against Bajaj in this case. The INR has been overly strong since the beginning of the calendar year. In fact, the INR has strengthened from Rs.68.5/$ to 63.5/$. This has blunted the competitive edge of export pricing which has impacted demand. Secondly, the key markets for Bajaj are Africa and Latin America and both these markets have been hit by weak oil prices. That has constricted demand and has dented exports to these geographies.

All about the premium market…

The one lesson that India learnt from Eicher in the last 10 years is that there is a huge market for powerful high-end bikes in India and abroad. Bajaj realizes that fighting it out in the entry level will always be a low-margin game. The answer would be let the entry level segment help the market share and the premium segment help the company to make margins. Eicher gets enviable valuations in the market purely because of its focus on the high margin premium segment. That is the whole intent of the Triumph deal. For the sake of India Inc, Bajaj needs to get its act together! ©

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