EV Bikes – A New Era

Nishith Paul, a bright 38-year-old VP Products and Engineering of Kaiser Motorcycles woke up with a
start as the alarm for 6am went off. He felt tired. The last few years after he took over as the VP
Products and Engineering have not been easy. The Kaiser Motorcycle company was started in 1970 by
the flamboyant Raj Mehta, who was known for his iconic design focus and making factory customs for
his niche customers. The customers of KM were the youth of the young India post-independence who
belonged to rich families and could afford a custom designed motorbike which was probably as
expensive as a car in those days. The bike became a cult classic after Rajesh Khanna, the cine superstar,
drove the KM on Juhu Beach trying to woo the beautiful Hema Malini in the song “Zindagi Ek Safar…”

Each bike was customized for the buyer and the company took pride in this flexibility. It was claimed
that no two bikes from the factory were alike. A team of engineers would spend 6 meetings with the
potential buyer till they got all his/her requirements right. And then they would build the bike for
him/her. Such was the cult feeling that the bike would have the name of the owner engraved on it. And
at some place inside the sheet metal that covered the engine, hidden from the common eye, the names
of the engineers who made this machine were engraved too. By 1975, KM had a factory in Pune that
made about 1000 motorbikes a year. Each bike was priced at Rs20,000/.

By 1995, KM was one of the most known brands for youth and had scaled its operations to all major
cities of India. It had 4 factories in India that made about 50,000 bikes. Each bike costed a whopping
1,00,000 INR and the wait list for this beauty was at least 14-18 months. As India grew, foreign bike
makers like Honda and Yamaha offered bikes at Rs20000 and they created a completely new segment
for the youth who did not want customization and were cost sensitive. KM continued its focus on design
and produced more expensive bikes as their philosophy was to cater to a segment that valued the
engineering ability of its teams and custom requirements of its customers. Its employees who were
handpicked engineers and technicians from the top institutions and polytechnics of India, were good at
their work. They were taught to put the best materials and focus on the customer’s requirement. If a
part that needed a special tool or material costed a fortune, they would not hesitate to order it. The
costing department was to comply with every request from the engineering team.

As the economy grew, so did the inflation and all other labor issues. It became very expensive to
manufacture the same bike in the year 2000. KM responded by increasing prices – nearly doubling it to
Rs2,00,000. In those days, a Maruti 800 was cheaper than KM bike. The focus was to deliver a custom
designed bike. No doubt, the bikes were an engineering marvel, but costs spiraled above, and profits

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shrunk. They were slowly being exported to Italy and other mature countries where there was a huge
market for them. But in those markets, Honda, Yamaha, Harley Davidson, Hyosung etc. had already
established huge base. So, India market was pretty much where all their fortunes rested.

Raj Mehta was called the Infante Terrible of the industry as he rubbished criticism from industry experts
who cautioned him to reduce costs and change his strategy to make products for the masses. He was
treated like a God in his factories and his customer shows and he would spew venom on anyone who
would challenge his philosophy of “Focus on flexibility, not cost”. In all the factories, the same poster
was put on every wall for everyone to have a clear view and live by it. By 2010, each bike cost
Rs10,00,000. Even a Harley Davidson basic model was cheaper than this.

In 2011, Raj suffered a heart attack and was hospitalized. His son, Zubin was in USA working for Ford
Motors in Detroit. He had earned his own space in the automotive segment by introducing the Beat and
Volt – Ford’s turnaround cars that saved them from a disastrous negative spiral. Zubin rushed back to
India to be with his father. The doctors advised that Raj take a step back and based on that, the board
requested Zubin to take charge of KM. He reluctantly agreed. Things were not looking good at KM and
by 2012, Zubin hired Nishith Paul to focus on new bikes for the market.

Nishith had a background in creating new products for the automotive sector. He cut his teeth in making
cars for Indian markets and was in the core team of the Scorpio from Mahindra Cars. He had a knack for
understanding Indian audiences better. As soon as Nishith joined he spent the first few weeks with
shareholders and distributors. He also spent time in the biker clubs and found out the brand is still very
strong. He met investors and hired McKinsey as a strategic consultant to do an analysis on what are the
blind areas. The report came out very clearly that

• there is a huge market of bikes that are cheaper that KM is ignoring.

• The message was clear “Reduce costs by being less flexible and produce more”.
• And it cannot survive the onslaught of the biggies like HD, Honda, Hyosung, BMW, and Ducati
for long. They made expensive bikes but had also figured out balancing costs to produce the
same. They had started using economies of scale principals, value engineering to bring costs
down, without diluting quality and profits.
• The competitors in the cheaper bikes below 1Lakh were Honda and TVS.

Nishith then met employees and was happy to see that the pride of the workers and the design teams
was still very high. The finance department was the most despondent because its job was to just buy
whatever the factory asked. There was no cost analysis done and profits were eroding. KM’s philosophy
was to increase prices in response to keep profits healthier but very soon, the customers started finding
alternatives in foreign brands. Yezdi had also entered the market. Harley Davidson was out. Indians are
quite price sensitive – Nishith knew that from his Scorpio background.
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In 2016, Zubin convinced his father and the board to launch a bike at Rs 2.5Lakh for Indian markets and
the wait time was considerably reduced as they broke away from their philosophy of sacrificing cost to
flexibility. The response was lukewarm. But this helped the company stay afloat. Private Equity firms
backed up KM’s growth plans and Zubin had a cushion to invest in R&D ideas of Nishith. Nishith and his
team also launched a Rs1Lakh bike and were now entering the low-cost markets that were dominated
by Honda, Hero and TVS.

2019. Nishith was convinced that unless the company changed its focus from bikes to some other
products, it was headed for a sheer dip of Niagara Falls. He also knew that this focus was deeply rooted
in the way KM was formed by Zubin’s father and how they built the organization over decades. Bikes
were their DNA. But the time had come for Nishith to make it very clear for the whole organization to
get the message. He also started researching on Electric Vehicles and was inspired by YuLu bike. He
started to see young entrepreneurs from various engineering colleges making EV scooters. Aether was
now a big brand and Ola also announced a mega factory to manufacture EV 2 wheelers. Nishith knew
that instead of fighting a lost battle with Honda, Royal Enfield, TVS, the new world of EVs would be the
market they should focus on. He also was very inspired by Tesla and there was a market in Electric 3-
wheelers and cars which Tata’s and Mahindra’s were entering into. Nishith was about to present a
strategy but Covid19 happened. So he postponed this plan. Sales of the new bikes were flat.

2021. Covid19 devastation was smoothening. Factories resumed and everyone started to adapt to the
new normal. A board meeting was coming up in April. Raj Mehta would also be there along with Zubin
and many other members of the board, investors, and shareholders. The company was now looking at a
strategic investor or a buy-out. But Nishith felt that the company can move to EVs and be successful. He
had also created a working prototype and tested the market. The results were encouraging. The
problem was to now convince Raj, Zubin, and the Board. It was like going to a baker and ask him to open
a Chinese kitchen.

Assume you are Nishith. You must make a presentation to the board and show them the potential of the
EV market and propose the launch of a 40K EV bike for the young Gen X in schools and colleges. You
must influence them to change their way of thinking.

How will you research and collect data on EVs, Bikes, Cars and the automotive market?

How will you write this speech?

How will you deliver it?

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Copyright Rakesh Godhwani 2020
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