Riding around the globe

Bajaj Auto is looking for new roads to conquer. The two-wheeler giant is readying for a journey to different corners of the globe and on the travel itinerary are countries like the Philippines, Indonesia, Brazil and Nigeria "" and that's only for starters.

As the action revs up, the first destination is the Philippines where Bajaj is tying up with its international partner Kawasaki. The Japanese two-wheeler company will assemble the Indian bikes and sell them through its distribution network.

But the bikes will be sold under the Bajaj brand name. From there it's just a hop, skip and jump to Indonesia where Bajaj wants to find a joint venture partner and open an assembly plant in 12 to 24 months. Bajaj aims to start by assembling three-wheelers and then rev up the action with its two-wheelers.

Indian companies have always avoided Latin America, mainly because of the distance. But that could be the next journey for Bajaj.

The company is once again looking for a joint venture in Brazil and it plans to sell sporty bikes like the Pulsar in this country.

In a completely different direction there's Nigeria where value for money fuel-efficient bikes are in high demand but the roads are filled with Chinese companies.

Bajaj has faced some tough battles on Indian roads. So, why is it looking at other markets? For a start it has more or less finished the transformation from being only a scooter company into a two-wheeler giant with a garage full of motorcycles. And it figures that it's time to take on the world.

Says Sanjiv Bajaj, vice president, finance: "Ninety per cent of the world two-wheeler market of 30 million a year is located in India, China, south east Asia and Latin America. To be a global player you have to have a presence in these markets."

Bajaj points out that 7 million to 8 million two-wheelers are sold in south east Asia (compared to 5 million in India) so an assembly line in Indonesia will give the company access to the entire region "" because of free trade agreements between the Asean countries.

Then, there's Latin America where almost 2 million bikes are sold annually. The biggest market is Brazil where public transport is poor and a large percentage of the population is too poor to afford cars.

China is, of course, the biggest market in the world but that's one place where Bajaj isn't planning on going in the near future.

More than 12 million two-wheelers are sold annually in China but there are powerful local companies which will work hard to keep Bajaj out. Sanjiv Bajaj says the strategy for the time being is to go in for easier markets.

The fact is that exports already account for over 9 per cent of the company's volumes (it exported 150,000 two-wheelers this year).

Currently, bikes are shipped directly from its factories in India to Sri Lanka (where it has a 60 per cent market share of the two-wheeler market), Bangladesh and Nepal. It's even exporting to distant countries like Columbia and Guatamala.

Now Bajaj has set itself a new export target of 200,000 bikes for 2004-5. To achieve that goal it needs to get into newer markets which it has not targeted yet.

There are obvious reasons why Bajaj must set up factories abroad. In south east Asia, for instance, import duties on completely built units are as high as 20 per cent to 25 per cent.

Says R L Ravichandran, vice president, Bajaj Auto: "That is why it is essential that we buy some components locally in these markets as it helps in reducing the cost of our bikes."

So for instance Bajaj is looking at buying the tubes and the tyres in some of these markets locally, to save the high duty.

Bajaj knows that its global ambitions could face tough competition. For instance in the Philippines, Japanese giant Honda controls over 50 per cent of the two-wheeler market.

Similarly, in Indonesia it has an overwhelming 70 per cent market share of the 2 million a year market. In Brazil too Honda reigns supreme on the roads.

Says a rival in a leading two wheeler company in India: "Bajaj will get squashed in these markets from cheap Chinese products on one hand and Japanese giants like Honda which have both marketing muscle, distribution and products in these markets. I think it is a recipe for disaster."

Executives at Bajaj, of course, are aware that it will be an uphill task. And that is why both Bajaj and Ravichandran are trading cautiously.

For instance in Indonesia the gameplan is to move first with three-wheelers where competition is minimal.

Bajaj says that in the '70s the company had sold over 20,000 three-wheelers in Indonesia. Talks are on with the Government to replace these vehicles with CNG three-wheelers which are used primarily to carry goods.

Sanjiv Bajaj insists that the product is far superior to locally converted 'motorcycle rickshaws' which are turned into three-wheelers.

Ravichandran says that the company is still looking at which models should be sold in Indonesia for starters. That's because Indonesia is a 'step through' market and Bajaj's existing products might be tough to sell.

So the company may enter a niche. Alternatively, it might develop or revamp an existing product to meet the needs of the local market.

In the Philippines the strategy is different "" it is launching three products which include the Caliber 115, Wind and the BYK.

Says Ravichandran: "Our USP in the market is the range we are offering which includes a fuel-efficient bike like Byk for which there is no alternative in the market."

The company is selling the 125cc Caliber as an alternative to 100 cc bikes in the market. And Wind which is the world bike developed Bajaj for Kawasaki in the 150 cc category is being hawked in the market as a technologically superior alternative.

Bajaj won't discuss its pricing strategy but most of these bikes will be cheaper than their competitors from the Honda stable.

Brazil is an entirely different proposition. It's a market that likes sporty and stylish bikes. Ravichandran says that the company is considering taking the Pulsar to Brazil.

But he admits that it will be a tough call because the company does not have a distribution system in place and it will have to be built from scratch.

For Bajaj going global might be the new mantra but it's a tough one. In recent years it has fought some tough battles on Indian roads. Now it must rev up to overtake powerful rivals on unfamiliar roads.