EXECUTING MARKETING PLANS

Case Study: BAJAJ RE60: The Branding

Challenge of Disruptive Innovation

Group 12

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 1. Bajaj Auto Limited - Commercial Vehicle and Offerings

Q1: Assess the role of the CV division and the RE brand in BAL’s portfolio of offerings.

As the name suggests, Bajaj Auto Ltd (Bajaj Auto) produces automobiles. The firm
designs, builds and sells motorcycles and commercial vehicles. The business also
produces and sells a range of replacement components. Bajaj Auto has multiple
product lines, including entry-level commuter, commuter deluxe, sports, and
super-sports models. Some of the brands it carries include Avenger, Pulsar,
Discover, Platina, Ninja, CT, KTM, RE Compact 2S, RE60, RE Compact 4S, and RE
Optima.

BAL had three main divisions: the domestic motorcycle business unit (manufacturing
and sale of motorcycles), the domestic CV business unit (mainly manufacturing and
sale of 3Ws), and the international business unit (exports of 2Ws and CVs)

India's states of Maharashtra and Uttarakhand are home to Bajaj Auto's production
centres. Its 2- and 3-Wheeler vehicles are shipped to markets in Africa, Asia Pacific,
South Asia, Latin America, the Middle East, and Europe. Its headquarters can be
found in Pune, Maharashtra, India, which is also the location of Bajaj Auto.

BAL's largest plant is

located in the town of
Waluj, which is located in
the state of Maharashtra.
This is where they primarily
manufacture Commercial
Vehicle 3W, better known
as the auto-rickshaw. In
India, BAL controlled 51%
of the 3W market, with 88%
of that share coming from urban areas. Three-quarters of the world was covered by

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its operations. This included multiple countries in Latin America, Africa, the Middle
East, South Asia, and Southeast Asia. The market share of BAL as a leader in
international markets was 98 per cent in Egypt, 95 per cent in Bangladesh, 92 per
cent in Sri Lanka, 84 per cent in Peru, and 59 per cent in Nigeria

About 84% of India's three-wheeler

exports come from Bajaj, making it the
largest auto rickshaw manufacturer in
the world. Around 4,80,000
three-wheelers were sold by the
company in the 2012–13 fiscal year,
accounting for about 57% of the Indian market. Only 47% of these 3-wheelers were
sold domestically, while 53% were sent abroad. As a result of their widespread
popularity and iconic status in the country, the term "Bajaj" is often used
interchangeably with "auto rickshaw" when referring to vehicles of any kind in
Indonesia.

While the number of 3Ws increased from 0.5 million to 1.93 million in rural India
between 2006 and 2013, this increase was only a 3% CAGR in India's urban areas
during the same period and there was no reason for automakers to introduce
brand-new 3W models in such a market. Despite this, there has been a shift from 3W
passenger vehicles to goods transport and 4W vehicles in the small CV/goods carrier
segment in rural India. The Piaggio Apé, Tata Magic, and Tata Ace were three
examples of vehicles aimed at this market. 5 However, city dwellers in need of a CV
for their daily commute had
to choose between auto
rickshaws and taxis. More
than 90% of the urban public
service CV category was
made up of 3W
autorickshaws.

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 2. Bajaj Auto Limited - Quadricycle Context, Market Potential
and Consume Acceptance

Q2. Is the RE60 a path-breaking product for the company with the potential to disrupt

the market? Discuss the product within the context of its market potential, competitor’s
reactions, consumer acceptance, and possible, government regulations.

Context

Due to low personal vehicle penetration (less than 6% for 2Ws and less than 2% for
cars and utility vehicles), poor infrastructure, and population density, India's public
transit system was primarily dependent on Intermediate Public Transport (IPT).

There was no choice for commuters except to use private vehicles due to the lack of
public transit and the Indian government's disinterest in promoting its usage, which
increased traffic and pollution and necessitated the construction of bigger roads and
additional parking spaces. In addition to the negative impacts of an increase in the
number of vehicles on the road, it was predicted that the average speed of traffic
would decrease from 19.5 km/h to 7.5 km/h. 11 Smaller vehicles, such as 3W
auto-rickshaws, were more profitable for CV operators to operate under these
circumstances than bigger vehicles, like buses.

IPT was a great substitute for customers without access to a car or public
transportation. The market size of 3W auto rickshaws ranged from 15,000 to 30,000
in Tier 2 cities (i.e., those with a population between 1 million and 4 million) to more
than 50,000 in Tier 1 cities, according to a World Resources Institute policy brief on
sustainable urban transport in India (i.e., those with a population of over 4 million). 12
91% of the 2.4 million IPTs on the roads in metropolitan areas were autorickshaws.

The BAL team had discovered

vital information about urban
transportation that was
pertinent to changing market
circumstances. These
revelations implied that the
market required a novel
solution to address urban
transportation issues. Bringing

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such a breakthrough to the market might aid BAL in maintaining and enhancing its
dominant position. The creation of a quadricycle, a completely revolutionary product,
would help BAL take advantage of first in the market and capture and enrich the
Intermediate Public Transport segment to ease urban transport problems. BAL after
spending 5 years developing the Quadricycle product, including Bajaj revealed RE60
in 2012 Auto-Expo, the government issued a draft notification to make the
quadricycle a new category of vehicles in 2013 encouraging the production of
quadricycles. BAL prepared to release the RE60(working name) by 2014. However, it
was difficult for it to maintain its position in the face of fierce criticism from rivals and
stakeholders.

The RE60 has huge potential since it is an introductory innovative product in a new
market segment which is yet to emerge and become populated by other competitors.
The Bajaj RE60 was a product that put a dilemma into the market, which could be
taken as a product that has the potential to disrupt the market.

Because the RE60 product is an upgrade to the 3W and price effective than the 4W,
many aspiring taxi drivers who once were inclined to purchase 3W due to cost
factors, will now have a new alternate choice for them to make, thus having an
impact on both the 3W and 4W market.

When the RE60 was first introduced, competitors mocked and then opposed the idea
of Quadricycle with reasons citing pollution, safety, etc. Bajaj was already one step
ahead of them and had an idea of a commercial vehicle that could potentially change
the direction of the customer and the market. There are still many diverse opinions
from other competitors in the 3W market, Piaggio , for example, has commented that
introducing quadricycles to the market may not dent the 3W demand.

As Bajaj already has an established 3-Wheeler Market, introducing a quadricycle

with bajaj branding and as an extension of the RE vehicles, the quadricycle should
gain consumer trust and as mentioned above, the commercial vehicle drivers will
have different choices at a convenient price and better factors than a 3W.

After Bajaj revealed RE60 in 2012 Auto-Expo, the government issued a draft
notification to make the quadricycle a new category of vehicles in 2013 encouraging
the production of quadricycles. However, in 2016, Govt has introduced safety
standards for the quadricycles based on European auto-safety tests. These safety
standards make sure that the vehicle emits less pollution but is safer.

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 3. Bajaj Auto Limited - RE60 Product Development process
and Market Positioning

Q3: Analyse the development process of the new product. In your opinion, is the new
product relevant in the marketplace? How can the product be differentiated and
positioned in the market?

The BAL team had discovered vital information about urban transportation that was
pertinent to changing market circumstances. These revelations implied that the
market required a novel solution to address urban transportation issues. Bringing
such a breakthrough to the market might aid BAL in maintaining and enhancing its
dominant position. The creation of a quadricycle, a completely revolutionary product,
would help BAL take advantage of first in the market and capture and enrich the
Intermediate Public Transport segment to ease urban transport problems.

The next generation 3W project by BAL was an effort to create a brand-new product
with a contemporary appearance. BAL had the idea that the 3W may have a fourth
wheel added to it to create a four-wheeled auto rickshaw similar to a quadricycle.
The Husky 300 and Husky 500 product prototypes were discussed in the early
stages as a 4W quadricycle that would weigh close to 700 kilos (kg). BAL President
noted that due to uncompetitive cost and price, these prototypes were given up at
the idea or study stage.

The quadricycle had been around for a while in Europe when BAL started working on
its 4W vehicle, but it used more sophisticated material engineering. BAL decided to
use the specifications of the European models as a guide when deciding on a model
to use for the market release of this novel idea. It took on the problem of producing a
4W that adhered to the requirements of the European quadricycle using India's
resources for material engineering.

BAL's product philosophy was to give consumers business viability, not personal
ownership. It lost its attachment to automobiles. This urban vehicle is affordable. The
team asked: What is the most efficient city route from point A to point B? They
reasoned that a car weighing 660 kg or more used 10% of its capability to achieve its
goal but needed more energy and engine power. Later, they "rightsized" a 4W.
Commuters needed safe, fast public commercial transit. BAL saw market shifts and
new public commercial vehicle needs (see Exhibit 7).

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BAL found that urban travel required the new product's fuel efficiency and speed
(Case Study Exhibit 7). According to the report, taxi and 3W drivers bought these
vehicles for their "earning potential," therefore on-road price, fuel cost, and
maintenance cost were important. Simple repair, cost of ownership, load carrying,
and quality are other important asset qualities (breakdowns). Comfort, brand, and
prestige mattered. BAL's chief technical officer, Joseph, remarked that a car on
India's urban roads carried 1.7 persons at 25 km/h, making intra-city travel speed
irrelevant. Urban commuters needed neither speed nor power. However, high
pollution and fuel prices increased the economic and environmental cost of urban
commuter travel, making fuel economy and low carbon emissions important.

BAL prioritized speed, fuel efficiency, and emissions. Reduce weight, speed, and
engine cubic capacity. Fuel efficiency was limited by weight. The smallest aluminum
European 4W vehicle weighed 600 kg and cost a lot. BAL intended to build a 4W
intra-city vehicle with four seats, a decent speed, and pollution criteria. Automakers
prioritized road safety. Three-wheeled auto rickshaws were pedestrian-friendly.
“Safety difficulties became endemic only with [the arrival] numerous types of vehicles
with various potential speeds going on the same roads,” Joseph added, stressing the
need to optimize RE60 speed while ensuring pedestrian safety and fuel efficiency.

Eco-friendly RE60s. The BAL team knew air pollution was a big environmental issue.
Air pollution killed 100,000 Indians each year. The crew was shocked that private
vehicles caused 75% of pollution in a typical Indian metropolis and took action.
Joseph claimed the RE60's green quotient was low because 80 percent of a hybrid's
electricity comes from coal. BAL believes India requires an easy, quick emissions
solution. It hoped the RE60's 60 g/km CO2 would help India tackle pollution.

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Team Opinion:

The RE60 brand has huge potential since it is an introductory innovative product in a
new market segment which is yet to emerge and become populated by other
Auto-competitors. The RE60 is a product that can install a dilemma into the market,
which could be taken as a product that has the potential to disrupt the market.

BAL is the leading 3W manufacturing company in the world, it can use its domestic
and international customer base to promote RE60 quadricycle products in the
market. BAL wishes to introduce Quadricycle RE60 as a commercial vehicle, not as
a personal vehicle.

The company’s international business can promote RE60 product as a competitive

product for European quadricycle services and can also create a market in countries
where BAL’s international business presence is available.

As surveys highlight, Intermediate Public Transport (IPTs) continue to grow as an

alternative to public transport to ease urban and rural transport infrastructure. It
provides a good low-cost option compared to cab service or a better commuting
experience compared to Auto rickshaws in terms of comfort, safety, weather, and
pollution conditions.

RE60 got better prospects in the market as Quadricycles could provide better service
as last-mile connectivity for urban and long-distance public transport service points
like metro train stops, train stations, and central bus stations. This product also can
help to improve the connectivity between towns and rural remote villages in India.
BAL can extend Quadricycle products to Goods carrier vehicles for intra-city and
rural supply chain needs.

Challenges Ahead

This product could impact on BAL 3W sales if the existing customer base switches to
RE60. Central and State govt norms and permits quota could impact rate of growth
in India. Safety features compared to cars would be a disadvantage for RE60.
Pricing of RE60 would be a challenging if low-cost cars

Way Ahead

In Order to promote the new product and position BAL should come up with
innovative and creative marketing methodologies to target the new customers in
addition to the existing 3W customer base.

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BAL should project the marketing in such a way that it incentivises commercial
rickshaw drivers to upgrade and also personal two-wheeler drivers to look at the
vehicle as a worthy affordable alternative to a conventional four-wheeler.

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References

Bajaj RE60 Case Study content :

https://hbsp.harvard.edu/tu/8accda20

Hamara Bajaj Image

https://www.bajajauto.com/about-us/bajaj-auto-subsidiaries

Bajaj Auto rickshaws image

https://turbowheels.biz/10-proven-ways-to-outsmart-a-car-salesperson
-and-win-mira-auto-sales/

Bajaj RE60 image

https://www.motorbeam.com/bajaj-auto-says-nano-offers-nothing-but-l
ow-price/

SNU Image source :

https://snu.edu.in/news/newsroom/shiv-nadar-university-institution-of-e
minence

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