Business - Why Bajaj Auto got left behind

Shobhana Subramanian

There was a time when it seemed the Chetak would never go out of style; it was probably the largest-selling scooter in the world and by the time it was phased out in late 2005, around ten million Chetaks had been produced. Today, Bajaj Auto barely sells 700 scooters a month — it’s Honda Motorcycles and Scooters India (HMSI) that has taken charge of the market clocking volumes of close to 60,000 in November, 2008. For that month, HMSI was the country’s second largest two-wheeler maker, leaving Bajaj Auto at number three.

Why did Bajaj Auto get left behind in the scooter race? How could a company let go of such a great franchise? It’s true that some time around the mid-eighties, when Indo-Japanese motorcycles made their debut, it was fashionable to own one — even something of a status symbol. The bikes were trendy, offered tremendous economy, and weren’t too expensive either. Men didn’t want to be seen driving scooters and slowly switched to bikes and not too many women were driving scooters at the time.

But the scooter too could have evolved from the archaic, two-stroke geared contraption with a side-engine that it was, to the gearless, easy-to-drive, reliable and fuel-efficient models that even women are driving today. In fact, Kinetic Honda did come up with a couple of models, but Bajaj Auto couldn’t make the grade—industry watchers say the company didn’t spend enough time and money on R&D and possibly tried to cut corners, while sourcing components, in order to keep the price affordable. To be fair, Bajaj probably wanted to focus on the motorcycles market which then looked to be a big opportunity. To its credit, it managed to transform itself from a scooter company to a motorcycle company with some help of Kawasaki. In the premium segment, for instance, it has been the market leader with models like Pulsar and some of its executive segment models, such as the Discover, too have done well. Perhaps the management felt it didn’t have the wherewithal to focus on both scooters and motorcycles.

But it was also true that Bajaj didn’t try hard enough; possibly because it felt that the opportunity in scooters, whether for men or women, was over. In some ways it probably didn’t read the market correctly and that’s why it didn’t focus hard enough. Even LML managed to survive for a while and there was a time in 1998 -99 when Bajaj was faring worse than LML. The Legend, which Bajaj launched in 1998 and which was priced very competitively, didn’t exactly set the market on fire, neither did the Bravo, which came soon after. The products simply weren’t compelling enough. Even after Kinetic made the mistake of buying out Honda in 1999 (imagine where it could have been today had the collaboration continued!), Bajaj didn’t make too much of an effort to get back into the market. Without Honda behind it, it was only a matter of time before Kinetic lost its way. But instead of Bajaj which should have stepped in, it was HMSI that made the most of the opportunity.

Ten years later the scooter market is humming along. But it’s HMSI, which rode into the market in 2001, which is now the leader. HMSI re-invented the market with the four-stroke un-geared Activa, which was a runaway success and later the trendier Dio, which was an average hit. The Eterno, a modern version of the Vespa, didn’t find takers possibly because it was a geared, full size, four-stroke model.

Nevertheless, HMSI’s volumes are picking up. Its partner in India for motorcycles, Hero Honda, too has found itself a niche and some market share—the Pleasure, launched in early 2006, now does a run rate of 12,000-14,000 a month whereas in 2007, it was doing 7,000-8,000.The sharp positioning, targetted at women, has worked wonders, backed as it was by some wonderful advertising (‘Why should boys have all the fun?’) and all-women sales outlets. Interestingly, although Hero Honda is catering to women, 30 per cent of buyers are men and Hero Honda believes the ratio isn’t going to change in a hurry. There is clearly a market for scooters—in 2007-08 scooter sales were up 12 per cent, of course on a very small base. Sales of motorcycles, on the other hand, fell by 12 per cent. But in the current year too, sales of scooters could grow 10-12 per cent, going by the numbers so far. The size of the market now, at about a hundred thousand scooters and scooterettes a month, isn’t a bad number. It’s only a matter of time before Suzuki scales up—Japanese manufacturers are usually careful about putting in place a good sales and service network before they ramp up production. Meanwhile, Bajaj did come up with the Crystal but that hasn’t gone anywhere; since then there hasn’t been much talk about scooters. It seems to have given up altogether.