Modenas plots way up through partnerships
Tie-up with India’s BAL another step in regaining lost ground
COLLABORATIONS are the way of the future. Manufacturers are increasingly going into partnerships to share resources and enter new markets to expand their reach.
And after being in the doldrums for some years, Motosikal Dan Enjin Nasional Sdn Bhd (Modenas), a unit of DRB-Hicom Bhd, has also opted to work with others as it revs up for a second ride.
Notably, a partnership is the quickest way for Modenas to push new products to the market without having to invest time and money into developing its own motorcycles from scratch.
“Modenas is on a journey to carry itself up after being down for some time.
“We have a lot of plans to ensure that the Modenas brand rises over a short time through strategic partnerships,” Modenas chief executive officer Amirudin Abd Kadir told the media during a recent familiarisation trip to Bajaj Auto Ltd’s (BAL) Chakan facility in Pune, India.
Earlier this year, Modenas teamed up with BAL to recapture the domestic motorcycle market.
The tie-up with BAL comes hot on the heels of a successful venture with Taiwanese scooter brand Kymco last year.
What’s different about its tie-up with BAL, though, is that it allows Modenas to enter a new segment in the motorcycle market.
Previously known for its scooters and kapchais, Modenas has brought in three of Bajaj’s models, namely the V15, Pulsar NS 200 and Pulsar RS 200 for the street bike segment.
Modenas will also be bringing in Bajaj’s Dominar 400 early next year and possibly the Boxer motorcycles.
BAL’s different approach to advertising and promotions as well as its strong engagement with dealers and customers has already garnered the Pulsar a 35% share in Malaysia’s 150-500cc sports motorcycle segment as at September.
“For all three models, we have sold close to 2,000 units to-date. Our initial plan was to bring in 6,000 next year.
“But with the recent development and market feedback, we are targeting to do better than what we have targeted. We hope the trend continues,” says Amirudin.
Gaining market share
This development certainly bodes well for Modenas in its venture to gain significant market share in the years to come.
In FY2017 ended March 31, Modenas achieved sales of 39,725, making up 8% of the market.
The two-wheeler manufacturer noted that the motorcycle market shrank by 0.1% to 465,168 units in 2016 from 465,483 units a year earlier.
Amirudin says Modenas has allocated a capex of RM4mil over the next two years to increase the visibility for its products in the market.
He adds that Modenas will be able to tap BAL’s strength to improve its manufacturing and technology capabilities.
BAL has a strong track record in the twoand three-wheelers market, being among the top producers in the world.
The Indian manufacturer produces about five million vehicles a year and turns in an annual revenue of more than US$3bil.
It has three manufacturing plants, all located in India.
Its 109-acre Chakan plant, the most advanced of the three, boasts slick and advanced assembly lines styled after best practices by Japanese manufacturers.
It is dedicated to the production of high performance bikes, manufacturing some 100,000 vehicles a month, and employs 1,500 people.
But even the giant manufacturer understands the need to collaborate with others to expand.
“These alliances which we have put in place are actually an acknowledgement that the world is complex.
“And there is no single company which we feel can arrest the customer and be profitable in a meaningful way across the board and across all segments.
“What we are taking on, is the challenge of reaching out to as many as customers of Salient points motorcycles as possible spanning the global and spanning the different segments.
“We can’t do it all by ourselves. And therefore, we are entering strategic alliances with like-minded people who have got the same objectives.
“There is an opportunity all across the board and in that space, we see how best to make the most of that opportunity.
“That, we believe, is to be done through management of strategic alliances,” says BAL president of international business Rakesh Sharma.
Rakesh is keen to expand BAL’s footprint in Asean and has expressed interest to tap into Modenas’ operations as a hub to serve the regional market.
Currently, 45% of BAL’s production caters to the export market, of which Asean makes up 6%.
Modenas’ plant in Gurun is only running at about 50% of its capacity at the moment. At full capacity, the plant could potentially rake in annual revenue of RM600mil.
Additionally, Modenas will be able to ride on BAL’s expansion in Asean.
The tie-up would also enable Modenas to tap on BAL’s strong R&D capability as the automotive industry evolves with the changes in technology.
Note that most carmakers are already looking at producing electric vehicles and Rakesh says this trend, along with the emergence of tech-based companies, will eventually have serious implications on the two-wheeler market.
“This is an area that has to be monitored very closely. I think there will be false starts.
“But it is still important to be engaged in a broad spectrum where these changes take place and be prepared to experience the pain of a false start to learn from the process.
“And as (the industry) finds its equilibrium and direction, we will participate in that direction.
“We ourselves have been through so many changes.
“Our belief is, we will watch these things very closely and make our R&D sensitive to them, and continue to invest in the backend and the technologies,” says Rakesh.
He adds that BAL’s high profit margin of about 20% and solid cash reserves will allow the company to continue investing in R&D.
This will indeed help Modenas as it charts new growth areas.
Amirudin reiterates that its collaborations with global brands such as Bajaj and Kymco will be key to Modenas’ expansion.
One would be hard-pressed to make it on their own, notes Amirudin, particularly with today’s rising costs and competition.
With its collaborations and plans in place, Modenas is eyeing the top position in the local motorcycle market by 2020.
Expanding footprint: Rakesh is keen to expand BAL’s footprint in Asean and has expressed interest to tap into Modenas’ operations as a hub to serve the regional market.
Motorbike hub: Bajaj Auto produces about five million vehicles a year and turns in an annual revenue of more than US$3bil.