Bajaj Auto's dwindling market share may take a while to recover

Domestic market recovery for the Pune-based motorcycle maker, Bajaj Auto, may take a while, according to experts, with the company looking at fresh strategy to revive its Discover sales even as the competition is set to intensify in the coming quarters.

Bajaj Auto, which has been the market leader in the pulsar segment, has been losing ground in the mass volume category that forms the major chunk of the overall motorcycle market.

With the consistent decline in volumes of the company's Discover models, which represents the 100cc and 125cc segments, the company is forced to look at a fresh strategy to give a fillip to the fading brand.

Agreeing to the fact, S Ravikumar, president, business development and assurance, Bajaj Auto, said, "Discover is my only problem area. Except Discover, we have grown almost 20% in almost every area – including exports, pulsar segment, spare parts etc."

The company on Thursday reported a below-than-estimated net profit for the first quarter of FY15, posting a flat net profit of Rs 740 crore during the period. The biggest dent in earnings came from the domestic bike sales, which fell 14% y-o-y and 0.6% q-o-q to 490,938 units vis-à-vis industry growth of 10% y-o-y, while its domestic bike market share dropped by 494 bps y-o-y to 17.7% in Q1FY15.

Going by the data, there has been a consistent drop in the company's domestic market share with competition intensifying from players like Honda Motorcycle and Scooter India (HMSI), which is going aggressive besides the continued strong hold of Hero MotoCorp, the largest two wheeler manufacturer.

In the last fiscal (FY14), when the overall motorcycle sales grew almost 4%, volumes of Bajaj Auto declined almost 15%, while its market share came down to 20.03% from 24.4% in FY13, as per the data provided by Society of Indian Automobiles Manufacturers.

On the other hand, strong presence in the scooter segment helped its nearest rival TVS Motor exceed volumes in the domestic market for the first quarter (April-June) of this fiscal, making TVS the third largest two-wheeler manufacturer.

Ravikumar, however said, "We look at larger play and our approach is totally different from that of TVS."

Bajaj, the biggest exporter of bikes, is now focusing on realigning the strategy for Discover brand for the domestic market. The company will soon launch its new Discover 150cc, and is confident of regaining the lost volumes with the launch of a new product. "The new 150cc is targeted for the value customers, who are looking to upgrade from 100cc and 125cc," said Ravikumar.

Experts, however, feel that the new Discover 150cc may cannabalise the company's Pulsar models. Bajaj said the new model will have a differentiated strategy.

Realigning Discover models will be the second strategy to bring back volumes. Accepting the mistake, Ravikumar said, "We did the classic mistake of line extension." The company had earlier said that it will focus on 2-3 key models, rather than having 7-8 models under one brand.

Though the company had previously set a target of regaining the market share of 24% by October-December this fiscal, Ravikumar said the Discover sales will fall in place by January-March quarter.

Analysts feel that it may take a while for the company to get back to the lost market share. "Company's absence in scooter segment is the biggest challenge for Bajaj. Scooter is the only segment that grew even during slowdown," said an analyst from domestic brokerage who did not wish to be quoted.

"The company is focusing its efforts on the recently launched Discover 125 and the soon to be launched Discover 150 to regain market share. Fortunately, the Bajaj's other business models, namely the domestic sales of premium brand Pulsar and three-wheelers, as well as exports, continue to perform well. However, the volume growth for the company hinges on the success of the Discover brand," said a Sharekhan noted released on July 18.