Going solo in a waltz

In her biography of Rahul Bajaj, Gita Piramal writes how Indira Gandhi proved to be a game changer in India's two-wheeler story and why Bajaj chose to go it alone

September 1989 finds (Rahul) Bajaj in San Francisco to attend the International Industrial Conference hosted by the Stanford Research Institute International and attended by business leaders from sixty-two countries. This year’s theme was ‘Managing in a Competitive Global Economy’.
 

Walking around the campus, listening to Sony’s Akio Morita summit opening speech, chatting with buddies Viren Shah and Ashok Birla, Bajaj’s mind kept returning to the question: could deregulation and import liberalization lead to quality products which can take on international competition. ‘At present it looks beyond our reach to be global,’ he figures despondently.
 

To the India Abroad reporter Batuk Vora, however, Bajaj is his usual gung-ho self: ‘I must say this, and I told this to many delegates here, that what India needs is a few more years. I hope Rajiv Gandhi will come back to power after the elections and gradually open up our economy.’
 

‘My major aim in attending that conference was to exchange views with some of the top business giants,’ reminisces Bajaj. ‘When we were somewhere near a $300 million group, they were worth $300 billion. Bajaj Auto had begun exporting scooters and three-wheelers around the world, but we were nowhere near international standards. I even wondered if what we needed to raise the bedrock in India was 100 per cent ownership freedom for foreign investors.’

Namaste
 

‘The entire environment changed from the mid-1980s. We were no longer a Robinson Crusoe island, isolated and backward,’ he shared with Fortune’s Louis Kraar in 1986. The relationship between India and Japan had diminished to near-nothing after the testing of the Smiling Buddha, India’s first successful nuclear bomb on 18 May 1974.
 

The game changer turned out to be Indira Gandhi. She did her best to chip away at India’s sequestration. Her third term as prime minister between 1980–1984 saw her make forty international state visits, including one to Tokyo on 5 August 1982.

 Helpfully — and unusual for such conversations — Zenko Suzuki and Indira Gandhi were able to meet thrice in the course of Suzuki’s two-year term as prime minister. India needed Japan to reduce its dependence on the Soviet Union. Japan’s Prime Minister Zenko Suzuki was looking for new markets to whip up slackening economic growth and export stagnation in a global recession. The leadership of both countries began to reflect on the benefits of the ‘politics of harmony’. Suzuki’s term ended a few months later, on 26 November 1982. The policy approach towards India of the next Japanese prime minister, Yasuhiro Nakasone, remained consistent.
 

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Nakasone’s two-day visit to India between 3–4 May 1984, along with his minister for foreign affairs, Shintaro Abe (Shinzo’s father), was a revival of bonhomie between the two nations after a gap of twenty-three years. This was a much-needed salve by the Japanese. Still, in April, before arriving in India, Nakasone had dropped by in Pakistan to meet Zulfikar Ali Bhutto. Japan was the largest aid donor to Pakistan. He advanced funds for Afghan refugees and called for the immediate withdrawal of Soviet troops from Afghanistan.
 

‘Aid was now described in Tokyo as strategic rather than developmental,’ described Nathaniel B. Thayer. ‘Japan has neither important economic interests in Pakistan nor close cultural ties with Afghanistan. The visit was totally political. In India, Nakasone’s talks with Indira Gandhi simply reflected his long-held belief that Japan can play a special role in the third world.’ To show he meant business, Nakasone brought with him senior executives from Japan’s biggest auto manufacturers to suss out potential Indian partners.
 

Re-elected for a second term a few days before Indira Gandhi’s assassination, Nakasone was back in India with Shintaro Abe for her funeral on 31 October 1984 and to introduce himself to Rajiv Gandhi. Once again, Nakasone came with a large delegation. This time with a ‘high-level’ economic team to consider areas of cooperation with India.
 

Sustaining the policy his mother had set, in 1985 Rajiv Gandhi would invite eighteen businessmen to a state visit to the Soviet Union. India opened its doors to the world’s biggest two-wheeler companies. But the question remained: who would dance with whom at this ball engineered by Rajiv Gandhi and Nakasone? And who would leave with whom after the ball was over? Indian auto majors smiled, but the swiftness of the Japanese encroachment was unnerving.
 

‘Accustomed to dominant positions in protected markets, local companies suddenly faced foreign rivals wielding a daunting array of advantages: substantial financial resources, advanced technology, superior products, powerful brands, and seasoned marketing and management skills,’ explain HBS professors Niraj Dawar and Tony Frost.
 

Four Japanese: Honda, Kawasaki, Suzuki, Yamaha. One Italian: Piaggio. 150 Indian applications whittled down to five: Bajaj, Firodia, Munjal, Nanda, TVS. The waltz began. Who would tie up with whom?
 

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Kawasaki, Yamaha and Suzuki had two-stroke engines on their motor­cycles. Only Honda had four-stroke engines. Other things being equal, a four-stroke engine is more fuel-efficient than a two-stroke one and this was the advantage Honda enjoyed over the other three motorcycle manufacturers in India.
 

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As Honda flexed its muscles in India, Bajaj faced a few anxious moments. ‘A closer look at the situation however convinced Bajaj’s managers that Honda’s advantages were not as formidable as they first appeared,’ explain Niraj Dawar and Tony Frost.
‘Instead of forming a partnership with Honda, Bajaj’s owners decided to stay independent and fortify their existing competitive assets. While Honda would enjoy some advantages in product development, Bajaj would not have to spend heavily to keep up. The makeup of the Indian scooter market, moreover, differed in many ways from Honda’s established customer base.

Consumers looked for low-cost, durable machines, and they wanted easy access to maintenance facilities in the countryside.’

Excerpted from Rahul Bajaj: An Extraordinary Life by Gita Piramal with permission from Penguin Random House India