Bajaj Auto bets on Discover to regain market share

Written by Rachit Vats | Mumbai | Updated: Jan 23 2014, 23:40pm hrs
Bajaj DiscoverA new 125-cc version of Bajaj Discover is scheduled to be launched in March 2014. Reuters
Bajaj Auto aims to regain ground in the domestic motorcycle segment through its Discover variants. The company also plans to spruce up presence in the entry-level and executive segments.

In October this year, Bajaj launched the Discover 100M, a toned-down version of the sportier 100T priced at Rs 47,700 (ex-showroom, Mumbai), which experts say is at a lower price point and in line with the Rs 42,000-48,000 price range seen in the segment.

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A new 125-cc version of Discover is scheduled to be launched in March 2014.

The company believes 100M, and the new 125 cc Discover,

along with the rest of the 100cc motorbikes, will together contribute almost 90-95% of the total Discover volumes.

The Discover family can give us somewhere near 120,000-125,000 numbers per month, which should happen by about June. This will be the result of the Discover that we have already launched in October and the new Discover that is coming up in February, beginning of March. We are talking of a 50% growth from the current volumes of 80,000 Discovers, Bajaj Auto president (finance) Kevin DSa said during an analyst call.

Our channel checks indicate Bajaj Autos newly launched Discover variant met with encouraging response, and we expect its volumes to recover from Q4 of FY14. Bajajs motorcycle volumes have declined 14% year-to-date despite a modest 3.3% growth in industry, largely owing to the poor show by Discover (year-to-date dip of 23% year-on-year). Our worst case scenario analysis indicates mere 1% downside from current levels factoring in multi-year decline for Discover and flat exports, said Aashiesh Agarwaal, head (research), Edelweiss Financial Services.

Bajaj Autos market share at the end of December 2013 was at a low of 20.5%, from a high of 32% at the end of FY07.

The company saw its sales fall 16% during the April-December 2013 period on a year-on-year basis. In the domestic market Hero is the dominant player with 52% market share while HMSI has about 15% market share.

While Bajaj Auto claims it is on track to regain market share on the back of new launches in the segment, it is also keeping a close eye on rival Honda Motorcycle & Scooters India, which has made rapid inroads in the domestic market off late.

Bajaj Auto market share losses could be due to Discover range losing momentum. Its premium pricing compared to other brands in the 100cc segment with better mileage tag as its differentiator did not appeal to consumers. Other reason could be related to Bajaj Autos late entry in the 110cc segment with limited products. The 110cc segment is a value-driven segment driven by fuel efficient models at reasonable prices, said Dharmesh Shah, auto analyst at SBICap Securities.

Further, though Bajajs Discover brand is perceived as a mid-segment brand, there is a wide disparity in the price/positioning of models within the Discover which appears to be confusing the customers.

There has been a glut of Discovers from Bajaj Auto, as the company tries to bolster its presence in the executive segment. Overall, there were five Discovers on offer three with the 125cc engine and two with the 100cc engine. While the company has announced the launch of six more Discovers in this fiscal (with three more to go), there has not been any communication with the dealers in this regard. The companys dealers believe sales are flagging given a combination of too many models and a price premium that cannot sustain, an analyst said.