1.

Bajaj lost market share to Hero Honda due to limited success in launching successful models into the

executive segment where Hero Honda had market leadership.

To recharge and revive their market position in motorcycles, Bajaj Auto developed three major

strategies: New executive top of range units: As this was the fastest growing market in India, Baja set up

an R&D facility at their main manufacturing plant in Pune to deliver new technology. The executive

segment had the highest profit margins due to a result of a premium pricing strategy associated with the

top of the range. Cost Reduction: As Bajaj’s large number of suppliers were fragmented and unable to

gain true economies of scale in production, they reduced the number of suppliers from 900 to 80. This

was achieved over a period of 10 years from 1998 to 2007. They further located these suppliers closer to

their assembly lines – similar to Toyota’s Just-in-Time delivery systems. Low costs were important in the

smaller motorcycle segment where profit margins were low and price competition, was aggressive.

Exports and overseas production: Bajaj Auto promoted overseas sales in Sri Lanka, Nepal, Columbia,

Bangladesh, Mexico, Peru, and Egypt from its three factories. By 2010 Bajaj Auto was selling 800,000

units annually in these countries.

2.

Bajaj was the market leader in this market with 480,000 unit sales in 2013 and a dominant 57 per

cent market share of the Indian domestic market. In order to develop its early motorcycle business,

Bajaj signed an agreement with the Japanese motorcycle company Kawasaki back in the early 1990s

to employ Kawasaki’s techno logy. In the early years, Bajaj was motorcycle market leader in India.

However, Bajaj Auto lost its market leadership in motorcycles to a rival company, Hero Honda, over
the years. The Bajaj market share was a steady 31 percent in 2014. It had declined slightly in 2009

and 2010 because the company had limited success in launching successful models into the fast-

growing executive segment of the Indian motorcycle market, where its major rival, Hero Honda, had

established market leadership.

Hero Honda -----------------MODELS

CDDeLuxe (97cc)

Splendor (125cc)

Passion (125cc)

Hunk CBZ Xtreme

Bajaj Platina (100cc),XCD

Pulsar (150 and 220cc)

Discover

TVS TVS Victor, Flame

Yamaha Gladiator (125cc)

Other manufactures include Honda Japan and Suzuki Japan

Bajaj Auto was well established in 2013 as a major motorcycle and three-wheeler manufacturer in

India. It had created three major manufacturing facilities for motorcycles and three-wheelers. It had

also developed a strong distribution and service network and an important R&D facility, which had
led to the introduction of the new Digital Twin Spark Ignition Technology. The company had also

become a major exporter of motorcycles in the Asian region and had set up a manufacturing facility

in Indonesia.

Up to 2008, the annual market for cars in India was substantially smaller than motorcycles – nearly 2
million cars versus around 7 million motorcycles. The main reason was that typical car prices were
$5,000 and upwards – affordable only to the wealthier middle-class Indian family and substantially
higher than motorcycle prices. (The detailed figures are given in Case 7 on Tata Motors in Part 6 of
this book.)
Then along came one of India’s most famous companies, the Tata Group, with a sensational new car
launch in January 2008. Its brand name was the Nano and it was marketed as the ‘One Lakh Car’
being priced at 100,000 Indian rupees – 100,000 being called ‘one lakh’ in the Indian numbering
system. Tata had produced the cheapest car in the world – one lakh was equivalent to around
$2,500. The company had spent years working on a clever new car design that combined space,
economy, and simplicity. The on-road price would be somewhat higher – probably around 1.3
million lakh or $3,250 – but it would still be competitive with the top-of-the-range motorcycles. And
this was a new threat and opportunity for Bajaj. Initially, Tata Motors was planning to introduce the
first prototypes from their new production line in June 2008 with full production in October 2008.
The company planned to manufacture 250,000 Nano cars in the first year but expected this to rise to
1 million cars after several years. The response to the new car was highly favorable. ‘Nano is
expected to change the automobile market in India. It would cater to a typical middle-income Indian
family of four who wants to avoid rain, wind, and dust. In fact, it was really threatened by all the
vehicle companies in India.
But it was only starting impression. As Case 7 in Part 6 of this book explains in more detail, the
Nano did not sell in the numbers originally predicted. By 2013, Tata was selling only around 50–
60,000 Nanos per year – far short of the initial projections. Implications for Bajaj strategy
Up to 2013, the sales of the Nano had no impact on the Indian motorcycle market. However, the
company was also aware of the widely publicized weaker sales of the Nano up to 2013.

3.