Bajaj Auto partners Kawasaki for Indonesia biz

Written by fe Bureau | Pune | Updated: Sep 19 2012, 06:15am hrs
After a rough solo ride in the Indonesian market, Bajaj Auto has decided to ride pillion with Japanese motorcycle maker, Kawasaki. Bajaj Auto on Tuesday got into a marketing partnership with Japanese motorcycle maker Kawasaki to sell the Kawasaki Bajaj badged motorcycles in Indonesia.

These motorcycles will be assembled at the Chakan plant by Bajaj Auto and distributed by Kawasaki through their network in Indonesia, Rajiv Bajaj, managing director, Bajaj Auto, said in Pune on Tuesday. The Pulsar 200 NS will be the first offering through this tie up.

The Bajaj Auto board approved this decision on Tuesday while the Kawasaki Heavy Industries board approved this tie-up on September 12.

This is not a JV but a simple distribution partnership. We did not think getting into a marketing JV was necessary, Bajaj said. The relation with Kawasaki is 30-year old and it was never a JV but it has sustained and this is Version 2 of the Kawasaki Bajaj partnership, Bajaj said.

While Bajaj can grow faster with Kawasaki in these markets, Kawasaki can focus on the larger bikes it specialises in so there is no conflict or cannibalisation, he added.

Bajaj had entered the Philippines market with Kawasaki and the stratedy was a huge success, so it wanted to try this model in the emerging market of Indonesia. Brazil is next on the agenda. The Asean plus Brazil is a 4 million motorcycle sales market and if we can get a reasonable share of 20%, it will be a fantastic growth engine for Bajaj Auto as these are very profitable markets and it is not just about volumes, Bajaj said. Currently Bajaj Autos motorcycle exports are at 1.55 million units with revenues of R6,500 crore.

Bajaj would take a call on what to do with the existing operations in Indonesia after addressing concerns of all stakeholders, Bajaj said. The decision to merge, set up a venture or launch a plan would be taken by next year, he said.

Bajaj Auto had forayed into the Indonesian market on its own and set up a 98.94% subsidiary PT Bajaj Auto Indonesia in 2007. The subsidiary has been assembling and marketing Pulsar bikes in Indonesia. But after trying to do things on its own, the company is now changing course.

The Bajaj MD said as an entry strategy for Indonesia, they had chosen to go alone as they wanted to understand these markets, the customer behaviour and preferences in these markets. Bajaj said they realised that it will be a long drawn process and take a lot of time and many years to do it on their own. So we had to find a way of compressing the process to three to five years and the best way was not to reinvent the wheel, Bajaj said.

Bajaj Autos Indonesian foray saw them selling about 50,000 motorcycles and in the process has notched substantial accumulated losses. It sells the Pulsar 135, Pulsar 180 and Pulsar 220 through a sales and service network of 152 showrooms and outlets across Indonesia. The total investment at PT Bajaj Auto Indonesia stood at R137.82 crore as on March 31, 2012.

It sold 23,337 motorcycles in FY12 and 21,586 units in FY11. The FY12 losses were at R12 crore while it was Rs 11 crore in FY11, Bajaj Autos Annual Report 2012 had noted.

The company found its products were relevant but these markets were dominated by the four Japanese brand Honda, Yamaha, Suzuki and Kawasaki and the market preferred Japanese brands.

It is impossible for anyone to make an impact here as the Big Four had a 100% market share. We want to make an impact in these markets so needed an entry strategy in that market that would be a viable and sustainable way to enter the market, Bajaj said for choosing to ride with Kawasaki.