BAJAJ

AUTO
LIMITED
By
Aashish Shukla
Ayushi Singhal
Deepak Rohilla
Harshdeep Singh
Mohit Kapania

COMPANY BACKGROUND
Jamnalal Bajaj, founder of Bajaj group set up sugar
factory & steel mill in 1930.
His son Kamalnayan Bajaj established Bajaj Electricals
in 1938 & Bajaj Auto in 1945.
Between 1950 and 1956, BAL imported 2&3 wheelers
from Piaggio.
In 1959, BAL got the license to produce 6000 units of
2&3 wheeler combined per year.
In 1960, BAL entered into tech collaboration with
Piaggio to manufacture its product and set up a
manufacturing unit in Akurdi.
By 1966, BAL had become the largest Indian producer
of 2 wheelers and product demand exceeded supply.

 Collaboration of BAL and Piaggio lasted until 1971

because of new governments regulation.
Due to restrictive import policies, BAL enjoyed the
high share of sellers market for entire 22 years.
During this period, waiting list for BALs vehicles
averaged 10 years.
Year 1975 BAL established a manufacturing joint
venture with state govt. of MH and held 24% stake.
Year 1980 Period of explosive growth and
production volume rose from 1,72,000 in 1981 to
800,000 units a year in 1990.
Year 1982 Govt. permitted infusion of further tech
and expansion of capacity.

 Year 1984 Tech collaboration with Kawasaki on

development and production of 2&4 stroke
motorcycles which gave BAL the access to new
motorcycle design and production expertise.
Year 1985 BAL established a second plant at
Waluj.
Prior to 1993 Four objectives of BAL business
strategies are :
1. Keeping costs and prices low.
2. Improving product quality.
3. Concentrating on 2&3 wheeler vehicles.
4. Trying their best for economies of scale.

PRODUCTS
BAL manufactured 12 different models :
5 Scooter models : Club, Super, Super FE, Chetak and
Stride
3 Motorcycle models : M-80, Kawasaki RTZ and Kawasaki 4S
1 Moped model : The Bajaj Sunny
3 three wheelers : rear & front engine Auto rickshaw and a
goods carrier
Two wheelers were :
1. Simple in tech
2. Economically priced
3. 10 to 15 years of average lifetime
. 90% 3wheelers used as low cost passenger taxis aka Auto
rickshaws and remaining 10% used as LCV and average
life of 3wheelers was 10years.

MANUFACTURING
In 1993, BAL The worlds lowest cost manufacturer of
2wheelers producing at rate of over 3,000 vehicles per day.
Akurdi Plant employed 5,800 workers and produced 4
scooter models, M-80 motorcycle and front engine Auto
rickshaws.
Whereas Waluj plant with 4.800 workers made 3 of scooter
models, the KB 100 and 4S motorcycle, rear engine Auto
and Sunny moped.
50% of components were sourced from outside vendor.
After production changes and tech agreement with
Kawasaki : Akurdi plant was bearing slogans Zero Defects
and Think Quality.
BAL used CAD/CAM and CNC equipments to achieve cost
benefits by producing in huge volume.

INDUSTRY STRUCTURE
Between 1950s and 1980s, tight control on industrial
development policy in product, capacity, technology
and foreign exchange.
Indian economy opened gates for foreign competitors
and expanded the domestic production.
Since 1990s, starting period of recession due to which
inflation rose to average 13%, interest rates shot up
and CPP had dropped.
Indian 2&3 wheeler market was 2nd largest in world
with 1.53 millions units sold in 1992.
When the range & volume of consumer goods
increased, the demand for 2 wheelers declined in 1992
and 2 wheeler industry suffered from overcapacity.

CONSUMER & MARKET SEGMENT

Segmented households by earnings and those
groups more likely to purchase 2wheeler products.
Two wheelers used for daily commuting and
became means of personal transport for entering
workforce.
Concept of Cannibalization used proportion of
consumers replacing their current vehicles
exceeded 1st time buyers.
Resale Value of 5year old BAL scooter was
averaged 60% of current price of new BAL scooter.
Rural consumers concerned with value for money
Urban consumers concerned with appeal of the
product

TARGET CONSUMER GROUPS

Scooters for family man b/w age of 27 & 38 years,
family vehicle , used to transport whole family. Word of
mouth, brand name, mileage, low maintenance and high
resale value were key aspects for these consumers.
Motorcycles as sturdy vehicle for rough roads or young
single men aged between 21 and 30 years looked for
power and style.
1. 2-stroke motorcycles powerful and targeted at young
males
2. 4-stroke workhorses, more fuel efficient and better
value for money.
. Mopeds Appealed broader customer segment because
of its cheapest price, targeted at teenagers and women
who looked for style and trendy features and consumers
over 55years for low means of transport.

 In 1993, need for reliable, robust, low

maintenance and low cost products with features
like efficiency, style and riding comfort.
Effects on buying behavior interested in buying
proven products, due to peer pressure and
keeping up with neighbors.
Success key factors Spare parts availability and
number of service locations.

COMPETITORS
6 Indian groups dominated the domestic market,
all with foreign collaborators.
BAL was only with full range of two wheelers and
three wheelers.
All major Japanese brands had been marketed in
India since 84. All production was domestic with
percentage of imported parts varying.
BAL products were renowned for being rugged,
reliable and fuel efficient, low maintenance cost,
good spare parts availability and good resale
value.

 Honda, important competitor for Bal in 93, had 14% of

scooter market with its product kinetic in 1992.
In 1985, Honda launched 4 stroke motorcycle, Hero
Honda, which was fuel efficient to consumers, and helped
the company to become market leader with 33% by end
of 1992.
Hondas overall strategy was to increase its number of
dealers and provide them with average margins of 4.5%.
Yamaha had a licensing agreement with escorts, like BAL
and Kawasaki, & had 15% of motorcycle market with
escorts RX100.
Suzuki had JV with TVS group and had 8% in motorcycle
market.
Piaggio, with LML, had 11% share in scooter market.

BAL MARKETING STRATEGY IN INDIA

Objectives regarding product development were to
protect market share by
(a) Providing consumer with what they wanted
(b)Matching competitor product features by constantly
improving existing products
(c) Periodically introducing new products
() In 1985, BAL had 9 two- wheeler & three-wheeler
models on market, by 1992 it was 12 and by end of
1993 it was constant
() BALs new product development program in 1992,
was comprehensive and ambitious, with substantial
technical developments & new body designs.

 In 1970, Bajaj Chetak was developed, but government

curtailed BALs technical collaboration with Piaggio in
1971.
In 1980, BAL entered motorcycle market with, M-80.
With Kawasaki, it launched 2-stroke Kawasaki RTZ in
86 & 4-stroke Kawasaki 4S in 91.
It entered moped market in 91, with Bajaj Sunny.
Government
(1) Increased fuel prices by 30% in 1992
(2) Tightening of Indian emissions regulations b/w 1996 &
2001
(3) Tariffs on imported parts were 30% in 1993

DISTRIBUTION & SERVICE

By 1993, physical distribution was subcontracted
to 75 private transport companies.
Distribution system was computerized with 30%
of dealers connected by modem link.

Dealer Network

993, BAL had developed a network of 330 authorized dealerships in India, up fro
89, and 800 licensed service centers.
In 1993, BAL dealers were facing increasing competition, profitability
pressures, more demanding and sophisticated consumers, and a drop in
average sales volumes of around20%.
Dealers felt competition had intensified: the Kinetic Honda launched in
1987 had gained acceptance by 1990 in the Scooter segment; and Hero
Honda's 4-stroke was strong in the motorcycle segment.
Recent BAL new product launches had experienced a number oftechnical
problems. Consumers need a problem-free product.
BAL planned to expand its dealer network to 370 dealers over the next
two years, particularly in rural areas.

Consumer
Financing

ndian government, which controlled the banking sector, did not encourage bank
o-wheeler purchases, and, in 1992, only 15% of two-wheeler purchases were fin
s way.

crease sales, BAL established Bajaj Auto Finance Ltd. (BAFL) in 1988 to provide c
ce. By 1992, BAFL had financed over 100,000 vehicles through the BAL dealer n

lers were responsible for credit evaluations and collecting payments on loans an
r 50% of the cost of bad loans.

bruary 1993, 160 of the 330 dealers operated BAFL consumer finance schemes,
utives believed that 10% of all future BAL sales could befinanced in this way onc
erships were properly trained and organized.

Advertisin
g&
Promotion

s advertising expenditures had doubled in the 1990sfrom 54 million rupees in 19

to 110 million rupees in 1992, corresponding to 1% of total sales.

s advertising expenditures had doubled in the 1990sfrom 54 million rupees in 19

to 110 million rupees in 1992, corresponding to 1% of total sales.

rcycle print advertisements had a strong no-nonsense product focus and attemp
entiate BAL products from the competition on the basis oftechnical features.

etitor advertising expenditures for 1992 were as follows: Hero-Honda spent 36 m

s (corresponding to 1% of sales); TVS-Suzuki spent 23 million rupees (1% of sale
ic-Honda spent 35 million rupees (3% of sales).

Pricing

was the industry's low-cost producer in India and aimed to maintain a price adva
y market segment of two-wheelers.

ever, on Kawasaki motorcycles, BAL's cost structure in 1993 did not allow for a si
r price strategy and, in the moped category, the Bajaj Sunny was priced slightly h
conventional mopeds because it offered consumers more features.

majority of BAL's profits were generated by scooters and three-wheelers. These p

itted the other products in the line to be priced lower in order to retain and/or ga
et share. In 1993, the Kawasaki motorcycles, M-80, and Bajaj Sunny were all just
ing even.

Exports

many years, due to high domestic demand and restricted production, BAL had no
oted exports. In 1975, for the first time, BAL exported 1,500 three-wheeler vehic
ladesh and commenced talks in other South-East Asian countries.

e same year, the company concluded technical licensing agreements with private
ees in Indonesia and Taiwan.

79, the first BAL foreign distributorship was established in Sri Lanka and the exp
ete vehicles was initiated.

ng the 1980s, distributorships were established on an opportunistic basis in the U

s, Germany, Southeast Asia, and North Africa. However, BAL's attempts to expor
oped countries in North America and Europe were cut short by a lawsuit instigat
io which threatened BAL dealers in those countries with legal action.

92, export sales represented 2% of total sales, with recent export growth coming
Latin America.

WORLD MARKETS FOR TWOWHEELERS

In 1992, the global three-wheeler market was
broken down as follows:
1) Bal had 33% market share with 55000 vehicle.
2) Piaggio an 18% share.
3) Tuck-Tuck ( Thailand) a 3% share.
4) Chinese manufacture a 38% share.

Market Share

33%
18%
3%

BAL
Piaggio
Tuck-Tuck
Chinese Manufacture

 In 1992, Bangladesh and Sri Lanka remained

BALs major exports market for three
wheelers, importing over 4,500 BAL units in
1992.

0.95
0.94
0.93
0.92
0.91
0.9
0.89
0.88
0.87

Bangladesh

Sri Lanka

In 1982, the world market for twowheeler vehicle was approximately

15 million units, by 1992, this had
declined to 11 million units.
Seventy-five percent of the global
market was dominated by five
manufactures:
1) Honda with 31% market share in
1992, up from 25% in 1982.
2) Yamaha with 24% in 1992, up
from 17.5%.
3) Suzuki with 7% in 1992, down
from 10.5%.
4) BAL with 7%, up from 1.5%.
5) Piaggio with 6%, down slightly
from 6.5%.

MARKET IN DEVELOPED
COUNTRIES
In the United States, the 50cc market was
dominated by Japanese competitors, and Bal had
no products in the above 250cc category- the
other large U.S. Two-wheeler segment.
BAL executives believe that, with the right
political and economic changes, these countries
would emerge as important markets around
1997.

MARKET IN DEVELOPING
COUNTRIES
In southeast Asia, Imports of two Wheelers were
restricted either by tariff barriers or import bans, and
Japanese manufactures had already established local
joint-venture production facility. China was the largest
market in the world and all the major two-wheeler
manufactures, particularly the Japanese, had set up
plants in china.
Competition in china was already intense. The major
problem with African countries was the difficulty of
access to foreign exchange and low consumer
purchasing power.

STRATEGIC OPTIONS FOR

GROWTH
BAL executives were
international markets.

considering

three

options

for

First, BAL could remain focused on the domestic market and

export only on an opportunistic basis.
Second, BAL could exports in developing countries that would
require minimal adaptation of the current product line.
Third, BAL could try to promote exports to developed
countries, initially focusing on the lower end of the moped
market in Europe.

THA
NK
YOU