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Our relationship with Renault-Nissan is an open book: Rajiv Bajaj

Source : BUSINESS_STANDARD
Last Updated: Mon, Dec 10, 2012 03:50 hrs

pstrongRajiv Bajajstrong the managing director of Bajaj Auto the country&rsquos second-largest motorcycle manufacturer holds a contrarian view on the economic slowdown In an interview with emSurajeet Das Guptaem he talks about his de-risking strategy as well as his company&rsquos much-speculated relationship with Renault-Nissan which many thought was over Edited excerptsppstrongThe motorcycle market has been on the decline this financial year Are you worried like most other players in the businessstrongbr I am certainly not going to jump on the gloom-and-doom bandwagon Yes the market is weak &mdash negative by two to four per cent &mdash but that is acceptable The industry sells 750000 to 800000 motorbikes a month If you cannot make money in such a big market you are incompetentppstrongYou had launched the RE 60 project at this year&rsquos auto expo Has the project got delayed due to lack of permissions from the governmentstrongbr We are holding various meetings with central government officials We will shortly go for pilot production Whether it will take the government three months or three years to give permission is anybody&rsquos guess But we are de-risking I cannot allow administrative failure to become a business defect We are preparing for international markets like Sri Lanka Bangladesh Africa Egypt and Latin America As a manufacturer I can only innovate if it benefits other markets before India it will be unfortunate We should be able to launch the product in four-five months We will start with a manufacturing capacity of 200 RE 60s per day or 5000 units a monthppstrongThere is no clarity on your relationship with Renault Is it as a Nissan executive visiting India recently said a closed chapterstrongbr I don&rsquot know what to make of the comment It is still an open book We have provided them all the information on the project and do ask them once every month or two They say we are discussing internallyppstrongDid the Nano&rsquos failure change your mind on the need to work on a carstrongbr First the car business has poor profitability unless you are differentiated like BMW or Porsche Second Bajaj&rsquos marketing position is as an anti-car company We would like people to give up cars and ride around on mobikes and scooters three-wheelers and four-wheelers It was with this aim that we started talking to Renault-Nissan If it wanted to make a car it would not come to us In November 2009 much before the Nano ran into trouble in the market it had become clear that such a concept would not work Also the ultra-low-cost project was conceived in the same direction I met Carlos Ghosn and told him I could not take this chance I discussed with him the idea of the RE 60 and he gave his go-aheadppstrongWhat has Renault-Nissan&rsquos response to the RE 60 beenstrongbr I am still waiting They said they would come back and my team has been talking to them I can merely speculate that they could be awaiting the quadricycle regulation in India They have been fully supportive of the new segment at all SIAM meetingsppstrongYou already have the R60 Will you be open to the idea of Renault-Nissan selling the same product in Indiastrongbr We can both sell the product of course after the vehicle goes through some minor modifications The R60 is positioned as a commercial vehicle and does not aim to win a beauty contest Renault might want to sell it as a personnel vehicle In that case we can jazz it up a little so that they can target young boys and girlsppstrongWill you stick to mobikes or re-enter the scooter segment which is growing faststrongbr In India 70 per cent of sales volumes in two-wheelers come from mobikes Globally we sold four million motorcycles in a world market of 40 million So we are far from being a dominant player even in mobikes At least in the home market we should be neck and neck with the leaders and have at least 20 or 30 per cent share in the foreign marketsppWe are not what McDonald&rsquos is to burgers that&rsquos what we want to beppstrongThe mobike market is de-growing Do you see the trend continuing in the next three to six months And does that worry you strongbr Bajaj is having a good year with Ebitda operating earnings margins of 20 per cent As our interest cost is zero and depreciation is less than one per cent of sales our profit before tax is also 20 per cent We are holding on to volumes our market share has moved up to 27 per cent and we do not offer discounts to push salesppOn the next three to six months no one knows We chase demand not growth because demand is a matter of fact growth is a marketing mans speculation Remember a one per cent market share increase means 7500 extra bikes a month which is what Suzuki sells the whole month Unlike cars and trucks where fixed costs are high two-wheelers are like fast moving consumer goods &mdash low fixed costs so you don&rsquot need huge volumes to make moneyppstrongYour much-touted Bharat bike through the Boxer 150cc was a failure What went wrong strongbr It did not go anywhere in the domestic market But we had de-risked our strategy We developed the Boxer as a platform from 100cc to 150cc and in Nigeria the 100cc bike has 50 per cent market share So even if the 150cc bike failed in India my platform did not The 150cc did very well in Egypt and Kenya too However in India a mobike with more power and torque at Rs 40000 was not accepted perhaps because consumers were worried about the fuel economy with prices hitting over Rs 70 a litreppHowever since we dont make products for one market but build platforms for global markets the failure of one variant in one market has no inimical impact upon our businessppstrongAre you worried about Honda&rsquos aggression in the countrystrongbr It has had two great successes the Activa and the Shine two-three mediocre successes and five failed modelsppWe are not dismissive of them but don&rsquot expect me to shake in my boots given these statistics As far as Hero is concerned I recognise they are the market leader for 10-12 years and I can&rsquot wish them away they sell twice as many bikes as we doppstrongHow is the relationship with European bike maker KTM going Has it helped you in the international marketstrongbr We partnered KTM not for technology but for marketing to markets like the US Japan and Australia which would have never happened in my lifetime if we went alone We own 47 per cent in KTM and we are selling 100000 bikes in the US Japan and Australia Increasingly we have started shipment from Chakan in India of the Duke 125cc to Europe by July it became a class leader in the 125cc segment in Europe We also exported bikes from India to JapanppstrongRatan Tata had said he was building the Nano because he did not find two-wheelers a safe vehicle in India What is your response strongMy response is that a two-wheeler is not an unsafe vehicle it is a vulnerable vehicle because it gets run over by overloaded Tata trucksp


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