Ba­jaj aims to script suc­cess with Triumph

Al­liance with UK motorcycle firm opens up im­mense op­por­tu­ni­ties in In­dia, other mar­kets for Ba­jaj Auto, says MD Ra­jiv Ba­jaj

Mint Asia ST - - News - BY S HALLY S ETH MO HILE

Acen­tury-old motorcycle brand that sur­vived bank­ruptcy and re­birth to emerge as an icon for bik­ing en­thu­si­asts has a story to tell and an ex­pe­ri­ence to share. Some­thing Ra­jiv Ba­jaj hopes to bring home as he en­ters an as­so­ci­a­tion with Triumph Motorcycle Ltd of the UK.

Un­der their global al­liance an­nounced on 8 Au­gust, Triumph and Ba­jaj Auto Ltd will de­sign and de­velop a new motorcycle in the “mid­dle weight” cat­e­gory, to be sold in In­dia as well as abroad. Mid­dle-weight bikes have an engine dis­place­ment of 250cc to 650cc. Ba­jaj, In­dia’s sec­ond largest bike maker, will build them at Chakan, near Pune, where it al­ready makes most of its mod­els.

For Ba­jaj, Triumph is more than about sales and prof­itabil­ity (big­ger, costlier bikes are more prof­itable) but also be­cause it will en­able the company to bring the en­tire Triumph heritage and the story and ex­pe­ri­ence as­so­ci­ated with the brand.

In an in­ter­view, Ra­jiv Ba­jaj, man­ag­ing direc­tor of In­dia’s largest ex­porter of mo­tor­cy­cles, said the lat­ter is crit­i­cal, as it’s the story and ex­pe­ri­ence that dif­fer­en­ti­ates a prod­uct from a brand. Un­like a Royal En­field, this has been a miss­ing piece for Ba­jaj, which makes Pul­sar and Dis­cover mo­tor­cy­cles.

“What we are re­ally ex­cited about is not In­dia alone, but mar­kets out­side In­dia (as well),” Ba­jaj said. The fact that Triumph is a well­known brand from the US to Ja­pan, and has the tech­nol­ogy, dis­tri­bu­tion and qual­ity, bodes well for Ba­jaj and opens up im­mense op­por­tu­ni­ties in In­dia and sev­eral others mar­kets, he added.

“If we can sell Rs3,000 crore worth (of mo­tor­cy­cles) in In­dia, we can sell Rs3,000 crore worth out­side In­dia. If we can have a bot­tom­line of Rs1,000 crore in In­dia, we can have dou­ble or triple of that, out­side In­dia. That’s the size of the op­por­tu­nity,” he said.

Ac­cord­ing to Ba­jaj’s rough cal­cu­la­tions, when the new bike hits the road in two years, Royal En­field Ltd, which sells 60,000 mo­tor­cy­cles per month in the mid­dle-weight seg­ment will, in all like­li­hood, sell a mil­lion units ev­ery year. Ex­pect­ing large vol­umes for its Triumph model, Ba­jaj is plan­ning to build a ded­i­cated man­u­fac­tur­ing unit closer to its ex­ist­ing Chakan plant. In­vest­ments and ca­pac­ity of the new unit will be fi­nal­ized in six months.

Ba­jaj said if the new Triumph-ba­jaj model is priced at Rs1-1.5 lakh ex-show­room and Ba­jaj cap­tures even 20-30% of the seg­ment, with an Ebitda (earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­za­tion) mar­gin of 20-30%, it makes for a bot­tom­line of Rs1,000 crore a year, with a topline of Rs3,000 crore a year in In­dia alone.

This is the same “cost plus” rev­enue model that Ba­jaj has with KTM Power Sports AG. Ba­jaj said the bikes it ex­ports for KTM en­joy high Ebitda margins, point­ing out that the part­ner­ship with Triumph “is based on the tri­an­gle of mu­tu­al­ity, trans­parency and rec­i­proc­ity.” While Triumph ben­e­fits from Ba­jaj’s abil­ity to en­gi­neer the bikes at Indian costs, Ba­jaj gets the mar­ket ac­cess.

Ac­cord­ing to Nitesh Sharma, an an­a­lyst at Phillipcap­i­tal In­dia, Ba­jaj will have to sell 400,000-500,000 units of lo­cally pro­duced mod­els ev­ery year to earn a profit of Rs1,000 crore.

“While it’s doable, it would take the company some time to reach those vol­ume lev­els,” Sharma said.

The mid­dle-weight seg­ment, which the duo are tar­get­ing, is cur­rently dom­i­nated by Eicher Mo­tors Ltd’s Royal En­field that makes 350cc and 500cc (and one 535cc) bikes. Ba­jaj makes one in that cat­e­gory—the 375cc Dom­i­nar—and Triumph none. In In­dia, the world’s largest two-wheeler mar­ket, buy­ers have been up-trad­ing to big­ger mo­tor­cy­cles. In 2016-17, for in­stance, Royal En­field sold 651,107 mo­tor­cy­cles in In­dia, an in­crease of 30% from the pre­vi­ous year.

Un­der their deal, Ba­jaj will mar­ket Triumph mo­tor­cy­cles and supply spares in Sri Lanka, Bangladesh, Nepal, Myan­mar, Columbia and most of Africa, among others. Sim­i­larly, all of Europe, US, Ja­pan, New Zealand, Aus­tralia and some mar­kets of Latin Amer­ica like Brazil, where Triumph al­ready has a pres­ence, will be man­aged by Triumph.

In In­dia, Triumph’s ex­ist­ing 13 deal­er­ships will con­tinue to be man­aged by the company’s wholly owned In­dia unit, till the jointly pro­duced mod­els are ready. A year be­fore the roll­out, Ba­jaj will take over the Triumph network and start sell­ing both high-end mo­tor­cy­cles as well as mod­els meant for the mass seg­ment and will ex­pand the deal­er­ship to at least 400.

AB­HI­JIT BHATLEKAR/MINT

Growth plan: Ba­jaj Auto MD Ra­jiv Ba­jaj.

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