Submitted by:

Aditya Sikder
Nidhi Raj
IVth Semester Prerna Malhotra
MHROD Richa Bigghe
Shreyas Shah
• About the company
• SWOT analysis of Bajaj Auto Ltd. (BAL)
• Introduction to the case
• BAL and the two-wheeler industry
• Turning point in the market
• BAL fights back
• Fall of an icon and the rise of a new brand
• Bajaj In the news
• Summary
• The Bajaj Group, founded in 1926, is amongst the top 10
business houses in India.

• Kamalnayan Bajaj, Son of Jamnalal Bajaj, established Bajaj

Auto in 1945

• Footprint stretches over a wide range of industries, spanning

automobiles (two-wheelers and three-wheelers), home
appliances, lighting, iron and steel, insurance, travel and
finance.

• The group's flagship company, Bajaj Auto, is ranked as the

world's fourth largest two- and three- wheeler manufacturer
and the Bajaj brand is well-known across several countries in
Latin America, Africa, Middle East, South and South East
Asia.
• The present Chairman of the group, Rahul Bajaj, took charge of the
business in 1965 and under his leadership, the turnover of the Bajaj
Auto the flagship company has gone up from INR.72 million to INR.
120 billion

• Bajaj is India's second largest motorcycle maker, smaller than

Honda Motorcycle Scooter India, but larger than TVS Motor Co. Ltd.

• The company is well known for their R&D, product development,

process engineering and low-cost manufacturing skills.

• BAL executives described the target consumer groups for each two-
wheeler product as follows:
• Scooters : For the family man
• Motor Cycles : for those who worked in rough conditions
• Mopeds : Broad customer base
• The Bajaj group was founded in 1926 by Jamnalal Bajaj. In
1945, Kamalnayan Bajaj, Jamnalal's son, set up Bachraj
Trading Corporation Ltd. (BTCL), a trading company, to import
and sell two- and three- wheelers. This business continued till
1959.

• In 1959, the company secured a license from the Government

of India (GoI) to manufacture two- and three-wheelers. In
1960, BTCL was renamed Bajaj Auto Ltd. (BAL) and the
company went public. The same year, it entered into a
technical collaboration with Piaggio for the manufacture of
scooters.
• Strengths:
• Highly experienced management.
• Product design and development capabilities.
• Widespread distribution network.
• High performance products across all categories.
• High export to domestic sales ratio.
• Great financial support network (For financing the automobile)
• High economies of scale.

• Weaknesses:
• Hasn't employed the excess cash for long.
• Not a global player in spite of huge volumes.
• Not a globally recognizable brand (unlike the JV partner Kawasaki)
• Opportunities:
•  Double-digit growth in two-wheeler market.
•  Untapped market above 180 cc in motorcycles.
•  More maturity and movement towards higher-end motorcycles.
•  The growing gearless trendy scooters and scooterette market.
•  Growing world demand for entry-level motorcycles especially in
emerging markets.

• Threats:
•  The competition catches-up any new innovation in no time.
•  Threat of cheap imported motorcycles from China.
•  Margins getting squeezed from both the directions (Price as well as
Cost)
•  TATA Ace is a serious competition for the three-wheeler cargo segment.
• In the mid -1940s ,BAL started as an importer of two –and
three-wheelers.
• In the early 1960s, in collaboration with Piaggio, started
manufacturing vespa brand scooters at its plant near Pune,
Maharashtra
• In 1970s, BAL started manufacturing scooters under the Bajaj
brand.
• BAL’s first scooter model under the Bajaj brand was
introduced in 1972.
• In the late 1990’s the Indian two wheeler market witnessed a
shift in consumer preferences.
• In 2005-06 scooter sales in the Indian market were around 1
million units annually and consisted predominantly of gearless
scooters. In early 2006 BAL announced that it would launch
two new models of gearless scooters in 2006-07.
• 1950s -1980s, the Indian industry operated under "License Raj".
During this period, entities that wanted to produce two-wheelers
were required to secure licenses from the Govt of India. The
production capacity was also determined by the Govt. of India

• 1960s:Govt.relaxation to domestic companies.

• 1970s: BAL manufacture scooters under the "Bajaj” Brand.

• Scooters were more preferred mode of transport. ‘Chetak’ and the
‘super’ brands were launched. So popular that customers had to
wait for many years for delivery.(10-12 yrs for Bajaj Chetak).

• 1970s-1980s-Govt. introduced MRTP Act & FERA to give impetus to

auto industry
• The early 1990s saw a recession in the Indian two-wheeler market
and witnessed a saturation of the market, excess production
capacity, and increased competition. Overall sales of two-wheelers
declined by 15% in 1991 and 8% in 1992 .

• This period also saw a steep rise in fuel prices, hence greater
emphasis on fuel efficiency when purchasing a new two wheeler.

• Also, the pattern of demand changed & motorcycles became the

fastest growing segment.‡ Preferred to scooters in the rural areas
because of poor road conditions, and ‡Demographic changes like
Increasing proportion of younger people in the overall population

• However, even as late as 1997-98, the scooter segment was the

largest sub-segment in the two-wheeler market. Scooters, with 42%
of the market (in terms of unit sales), were followed by motorcycles
(37%), and mopeds (21%).
• Sales of motorcycles surpassed that of scooters for the first time in
1999 (with Hero Honda SPLENDOR)

• ‡In 1999-2000 scooter sales fell by around 75,000 units, while

motorcycle sales increased by more than 400,000 units

• BAL had volumes falling 40% year-on-year as scooters were 80% of

their total business

• ‡In 2000 Bharat Stage II, a new set of emission norms, came into
effect. It was for petrol two-stroke engines & it gave a blow to BAL,
which primarily sold two-wheelers with two- stroke engines

• By the end of FY 2000, the numbers clearly indicated that consumer

preference had shifted firmly toward motorcycles with four-stroke
engines, and industry watchers predicted that this trend would
continue.

• Geared scooter sales registered a fall of 41% in 2001. "The market

has shifted to motorcycles. We will have to follow the trend, "said
Venu Srinivasan, chairman, TVS.
• BAL realized, though rather belatedly, that it would have to
cater to the changing consumer tastes and preferences, if it
had to survive. Rajiv, who later agreed that BAL had been
slow in reading the demand pattern, said, ’The company failed
to anticipate the consumer behavior.’

• BAL increased its production of motorcycles by 67.6% in 2001

even as the production of scooters fell by 44%

• By 2001, the company was manufacturing as many

motorcycles as geared scooters.
 Since 2007-
To stress the
leadership position
2004 to 2007-
of the brand in the
Completely blue logo
market
to signify modernity
and dynamism
• Price differential between scooter and motorcycles had narrowed.

• In 2001, BAL lowered the prices of Chetak and Super by Rs. 5000 to
Rs. 8000 and removed some accessories like spare wheel, luggage
box, etc., from the base models.

• In the late 1990s while geared scooter sales were falling, the gearless
scooter segments had been growing at 25% per annum.

• Main purchaser of gearless scooters were teenagers, women, and older

people.

• In 1999-2000, BAL had a market share of 20% in this segment. In 2000

BAL introduced a new gearless scooter with a four stoke engine “Saffir
e”.

• In 2002, the Legend NXT 2, a four stroke geared scooter that was
claimed to offer a motorcycle like mileage of 60-70kmpl was launched
• To add to BAL’s problems, HMSI sold about 10,100 units of ‘Activa’
within just three months of its launch in 2001.

• Kinetic launched the ‘Nova’, another gearless scooter in 2002, which

also become quite popular.

• In April 2003, TVS launched the Scooty Pep (with a 75cc, four-stroke
engine), an upgrade version of its Scooty, with better styling,
technology, and storage capacity.

• In 2004 Chetak was introduced with a new gear system called

‘wondergear’ in which no gear shifting was required.

• New ad campaigns were also launched to brush up the Chetak’s

image.

• BAL was forced to phase out several models including the Spirit, the
Sunny Spice, the Legend NXT 2, and the Barvo. The Saffire,
reportedly, suffered from several technical problems. It was replaced
by Wave 2005.
• In Jan 2006, BAL announced that it had stopped production of
the Chetak. So that the company could upgrade its scooter
portfolio and regain the title of India’s largest scooter
manufacturer.

• Chetak had to phase out because BAL had neglected it in

terms of design, technology, and innovation.

• Chetak had remained unchanged for more than 30 years.

Customers used to call it a car on two wheels.

• At that time BAL had just one scooter model, the Wave. By
2005-2006 HMSI was leader in scooter segment with 50%
market share.
• Bajaj Auto redrafted its bike strategy that saw the Pulsar and
Discover act as the key growth drivers.

“DEFiNiTELY MAL
E”

• With monthly sales of more than 48,000 units in June 2009,

Pulsar became the leader in the 150 cc segment in India with
a market share of 43%.
• Renault-Nissan, Bajaj Auto sign pact for new
car.

• Bajaj Auto plans massive distribution network

expansion.

• Bajaj Auto will focus on bikes, not scooters.

• The case traces the company's rise to dominance in the
scooter segment of the market, and its eventual fall, against a
backdrop of changes in customer tastes and preferences.

• It describes the reasons for the shift in demand and discusses

the initiatives that the company undertook to regain lost
ground.

• The case also discusses the competition in the Indian scooter

market, and ends with a brief discussion on recent
developments in the two-wheeler market.