Bajaj Auto sets sights higher as sales slow
As the company loses ground in mass market bikes, it is betting on high-end Husqvarna to woo upscale buyers
Bajaj Auto’s Dominar, the company’s first premium motorcycle launched late last year, is yet to create visible ripples in India. But that hasn’t tempered the two-wheeler maker’s enthusiasm for the high-end segment.
After Dominar, the company has decided to bring to India the world’s second oldest motorcycle brand after Royal Enfield — the Husqvarna.
For a company that bets on its image for making affordable bikes, taking on a new segment far removed from its mass-market products shows how far Bajaj Auto is willing to go to capture new sales at a time when its traditional market is stagnating.
“A better product can just satisfy a customer but does not lead to customer acquisition. It is only by creating differentiation in the form of an altogether new category that we can take away somebody else’s customer and market,” said Rajiv Bajaj at the launch of the Dominar in December.
The demand for motorcycles, the largest segment by volume, has remained stuck between 10 and 11 million units a year in the last four years. While two consecutive deficient monsoons —2014 and 2015 — were a factor, the larger impact is coming from a shift in consumer preference towards scooters. However, Bajaj Auto, which once ruled the Indian roads with its scooters, exited the segment in 2010. In motorcycles, too, it has been losing ground, with sales declining 22 per cent in April-June quarter this year.
The company is betting on the Hasqvarna’s global appeal to woo upscale buyers. In 2016, the Hasqvarna recorded its highest ever sale of 30,000 units. “Husqvarna has done very well in recent years. We look to further expand volumes by combining forces with KTM. We will make the motorcycles at our Chakan plant for distribution in Indian and overseas,” says S Ravikumar, president (business development), Bajaj Auto.
Bajaj Auto has a 48 per cent stake in Austria’s KTM, a manufacturer of motorcycles and sports cars, and produces the KTM range of bikes in India for the local and export markets. “KTM was sharper in positioning. Husqvarna will appeal to a larger population in India, and we expect it to bring bigger traction than KTM,” adds Kumar.
Husqvarna started life as a Swedish company more than 114 years ago in 1903. The motorcycle gained popularity in Europe in the 1950s, and enjoys an iconic status in biking history like its Indian counterpart, the Royal Enfield, which was set up in 1893. German auto major BMW acquired Husqvarna in 2007, and the brand was sold to Austrian motorcycle maker KTM in 2013. A year later, Husqvarna posted record sales and revenue.
About 40 per cent of KTM’s production, or about 100,000 units, come from the Chakan plant in Pune. India, the world’s biggest two-wheeler market by volume, emerged as the second biggest market for KTM in 2016. The company sold 36,000 bikes in India, just 1,000 less than in its biggest market, the US, and has plans to sell a total of 50,000 this calendar year.
The price of KTM motorcycles sold in India start at ~1.45 lakh and goes up to ~2.33 lakh. Husqvarna will be positioned above this range. Husqvarna, experts say, is easier to ride than KTM bikes, and therefore it is likely to pull more buyers than KTM. “I do not think there is a competition to Husqvarna in India,” says Ravikumar.
A new range of Husqvarna models will be rolled out in Austria in early 2018. Later, in 2018, production of the 400cc Svartpilen 401 and Vitpilen 401 for global markets will be shifted to Chakan. Husqvarna will compete with brands like Royal Enfield in the middle weight segment of bikes.
However, it will not compete with the company’s other premium brand, the Dominar. Ravikumar says, “Husqvarna is a premium brand and there is no overlap or clash with Dominar or KTM. In fact, it complements our product range. We will do everything with KTM to make Husqvarna as big a brand as KTM.”
The company, which sits on cash reserves of $2 billion, is also believed to be in the fray to acquire European performance motorcycle brand Ducati. The thrust on premium powerful motorcycles, however, is not limited to Bajaj alone. Hero MotoCorp, is also gung-ho on this segment.
“We have an enhanced focus on the premium segment of motorcycles, as this category continues to see steady growth,” says Pawan Munjal, chairman, managing director and chief executive officer at Hero MotoCorp. The first product from Hero MotoCorp in this category will be a new 200cc sports bike, and the range will be expanded gradually. Its former partner, Honda, is also keen to mark a presence in the premium motorcycle market here.
But Royal Enfield, which dominates the premium middleweight segment in India, will prove a formidable challenge. “Our success in the mid-size motorcycling segment has attracted many other players from within and outside the country. While their entry will help develop the leisure motorcycling segment further, with our extremely strong value proposition and a highly differentiated brand, we will maintain our stronghold on the market,” says Siddhartha Lal, managing director and chief executive officer at Eicher, which owns the Royal Enfield brand.
Lal says the company’s success has not made it “complacent”. “We will continue to play to our strengths.”