THE CHALLENGE IS laid out clearly in front of Rajiv Bajaj. Not only will he commandeer Bajaj Auto to jostle for market share among new-age players in the electric scooter segment, but it will also be among the first major tasks Bajaj will have to take up without the larger-than-life presence of his father Rahul Bajaj, the patriarch of the Bajaj family, who passed away earlier this year.
Despite what the sales volumes of these new-age players may show about their prowess, Bajaj begs to differ. “There is a new EV maker every day. You may call them start-ups; I call them upstarts. I am amazed that people with no R&D, no engineering, are importing stuff that has not been validated for the marketplace,” he had said at the launch of Chetak Technologies Ltd., a new EV manufacturing unit, at the company’s Akurdi plant, near Pune.
Bajaj’s cynicism for these new-age EVs comes from precedence. To start its EV journey, the company reincarnated the very product which propelled it among India’s most pre-eminent makers of two-wheelers, the iconic Chetak brand. The bookings, first rolled out in early 2020, had to be stopped because of the pandemic, and could not resume before April 2021, a year later, although, it did not deter the hype that it first generated, and within 48 hours, Bajaj Auto had to stop taking bookings, owing to overwhelming demand. For FY22, it sold 8,187 units.
However, this year could very well be the blockbuster year the company envisioned for Chetak. Data from dealers indicates that the company sold 2,762 Chetaks in August, and with the upcoming festive season, Bajaj Auto could not get a better momentum. “A sharp focus on enhancing product aspiration of our strong brands, coupled with greater effectiveness in the sales enablement lever, has contributed to the growth in sales, profitability, and shareholder returns. With our EV strategy, which is led by Chetak, we will endeavour to set a similar benchmark here as well,” says Bajaj.
The successful volumes of the Chetak notwithstanding, Bajaj does not plan to hastily sell as many scooters as the company can. “Scaling up is not our number one priority at this stage. We are aware that we are dealing with a completely new animal, and we must get the technology, the quality, and the customer experience right. It is about R&D, the supply chain, and what happens at the dealerships — where the rubber meets the road. So, we are not in a tearing hurry to make millions of Chetaks. We will be selective about the cities we go to in India,” he had said earlier.
Initially, the Chetak was sold from two locations — Pune and Bengaluru. However, seeing the robust demand for this iconic model, Bajaj Auto has increased the touchpoints to 20 locations in FY22. It is expected to grow to 75 in FY23. The demand for Chetaks, however, is not restricted to the subcontinent. “We are seeing strong demand from our distributors in LATAM, in some of the ASEAN markets, and our partner KTM has expressed strong interest in distributing Chetak electric scooters in Europe. We are a global company, and we are hoping demand should come from all over the world for the Chetak,” Bajaj had said.
Strong export markets have enabled Bajaj Auto clock the highest sales figures in the company’s history, despite headwinds in the domestic two-wheeler market. For FY22, Bajaj Auto recorded net sales of ₹33,145 crore, and a PAT of ₹5,019 crore. It exported 2,506,626 motorcycles and commercial vehicles — amounting to exports worth ₹16,934 crore.
Analysts have flagged exports as a cause for concern for the company this fiscal — which have declined in successive months due to the double whammy of rising inflation and currency devaluation. Bajaj Auto exported 1,44,840 vehicles in August, a 28% decline year on year and 16% sequentially. “Exports are likely to be impacted in the near-term due to currency depreciation which will, in turn, result in higher retail prices. Africa remains under pressure (about 50-55% of Bajaj’s export volumes), while other countries are steady,” reads a report from Prabhudas Lilladher.
The biggest challenge that the company has faced in recent history is one black swan event after another affecting the recovery of the domestic two-wheeler market post Covid. The domestic two-wheeler segment declined by 28.9% in FY22, compared to FY20, retailing 1,19,73,415 units, according to data from the Federation of Automobile Dealers Association (FADA). Bajaj Auto retailed 16,32,897 units, cornering a market share of 11.70%. In the mileage, mass-market segment — which declined by 8% — Bajaj Auto’s sales in the segment rose by 2.8% to an average 101,606 units per month in FY22. Consequently, its market share increased from 15.2% in FY21 to 17% in FY22.
The sports segment, however, endured most of the declining market — with domestic sales falling by 19% in FY22, to an average of 150,885 units per month. Bajaj Auto’s sales fell as well. From an average monthly sale of 51,820 units in FY21, it dropped by 33% to 34,469 units per month. Consequently, the company’s market share in the segment reduced from 28% to 23%. Bajaj Auto has the second-largest market share in this category.
Bajaj, however, maintains that the company has shown its aplomb in the face of adversity. “The robustness of our business model by virtue of its flexibility and frugality has been validated through the pandemic for its ability to successfully sustain our stakeholders, most notably employees. We maximised pricing power and minimised marketing spends at the front end while reducing product and process cost at the back end through smarter engineering and TPM (total productive maintenance)-led productivity,” he says.
Bajaj Auto is the world’s largest manufacturer and seller of three-wheelers, and was most vulnerable to the headwinds. The domestic sale of three-wheelers — which crashed by 66% to 216,197 units in FY21 — has since increased by 21% to 260,995 units in FY22. Bajaj Auto’s domestic sales for FY22 has seen a 47% increase to 160,599 units. Its domestic market share of three-wheelers (passenger and goods) rose to 61.5% in FY22. An electric three-wheeler is slated to launch by the end of this year. “Our plans to launch the electric three-wheeler were delayed because our parts from China were delayed due to lockdowns there, but I am hopeful that before December 2022, we will launch the much-anticipated three-wheeler,” Bajaj had said earlier during the launch of the Akurdi unit.
Things are looking bright in the two-wheeler market, even though the recovery — witnessed on the back of the wedding season, the opening of colleges and offices — remains under the shadow of the pandemic blues. Bajaj Auto could only dispatch 1,04,772 units in August, lower than 1,25,921 a year ago. The quarter was hit by the semiconductor shortage, but the situation has now improved. “As these issues are now easing out, inventory re-filling is expected ahead of the festive season. Domestic demand is majorly driven by urban and semi-urban zones,” adds the Prabhudas Lilladher report.
Even though the three-wheeler space continues its healthy double-digit growth (83% YoY growth in August) and has now equalled 2019 sales, electrification is causing the bulk of the growth, and Bajaj Auto needs to roll out its electric three-wheeler soon. “There is a clear indication that customers are preferring electric vehicles over ICE vehicles as ICE three-wheelers continue to see double-digit de-growth when compared to pre-pandemic levels,” says Manish Raj Singhania, president, FADA.
But Bajaj remains mellow about the prospects. “Nobody knows the future,” he says about EVs, before adding that the key area where it would like to contribute is that of individualised, smart, safe, and sustainable mobility products. “These should make the cities of the world car-free, thereby minimising the four automotive evils of congestion, noise, fatalities, and pollution,” he enthuses. No matter what beckons for Bajaj, it will be done in accordance with the adage his father coined, “Do whatever you think best, but be the best at whatever you do.”