Bajaj Auto Limited is India's
largest manufacturer of scooters and motorcycles. The company
generally has lagged behind its Japanese rivals in technology, but
has invested heavily to catch up. Its strong suit is high-volume
production; it is the lowest-cost scooter maker in the world.
Although publicly owned, the company has been controlled by the
Bajaj family since its founding.
The Bajaj Group was formed in the
first days of India's independence from Britain. Its founder,
Jamnalal Bajaj, had been a follower of Mahatma Gandhi, who
reportedly referred to him as a fifth son. 'Whenever I spoke of
wealthy men becoming the trustees of their wealth for the common
good I always had this merchant prince principally in mind,' said
the Mahatma after Jamnalal's death.
Jamnalal Bajaj was succeeded by
his eldest son, 27-year-old Kamalnayan, in 1942. Kamalnayan,
however, was preoccupied with India's struggle for independence.
After this was achieved, in 1947, Kamalnayan consolidated and
diversified the group, branching into cement, ayurvedic medicines,
electrical equipment, and appliances, as well as scooters.
The precursor to Bajaj Auto had
been formed on November 29, 1945 as M/s Bachraj Trading Ltd. It
began selling imported two- and three-wheeled vehicles in 1948 and
obtained a manufacturing license from the government 11 years later.
The next year, 1960, Bajaj Auto became a public limited company.
Rahul Bajaj reportedly adored the
famous Vespa scooters made by Piaggio of Italy. In 1960, at the age
of 22, he became the Indian licensee for the make; Bajaj Auto began
producing its first two-wheelers the next year.
Rahul Bajaj became the group's
chief executive officer in 1968 after first picking up an MBA at
Harvard. He lived next to the factory in Pune, an industrial city
three hours' drive from Bombay. The company had an annual turnover
of Rs 72 million at the time. By 1970, the company had produced
100,000 vehicles. The oil crisis soon drove cars off the roads in
favor of two-wheelers, much cheaper to buy and many times more
A number of new models were
introduced in the 1970s, including the three-wheeler goods carrier
and Bajaj Chetak early in the decade and the Bajaj Super and
three-wheeled, rear engine Autorickshaw in 1976 and 1977. Bajaj Auto
produced 100,000 vehicles in the 1976-77 fiscal year alone.
The technical collaboration
agreement with Piaggio of Italy expired in 1977. Afterward, Piaggio,
maker of the Vespa brand of scooters, filed patent infringement
suits to block Bajaj scooter sales in the United States, United
Kingdom, West Germany, and Hong Kong. Bajaj's scooter exports
plummeted from Rs 133.2 million in 1980-81 to Rs 52 million ($5.4
million) in 1981-82, although total revenues rose five percent to Rs
1.16 billion. Pretax profits were cut in half, to Rs 63 million.
Competition in the 1980s
Japanese and Italian scooter
companies began entering the Indian market in the early 1980s.
Although some boasted superior technology and flashier brands, Bajaj
Auto had built up several advantages in the previous decades. Its
customers liked the durability of the product and the ready
availability of maintenance; the company's distributors permeated
The Bajaj M-50 debuted in 1981.
The new fuel-efficient, 50cc motorcycle was immediately successful,
and the company aimed to be able to make 60,000 of them a year by
1985. Capacity was the most important constraint for the Indian
motorcycle industry. Although the country's total production rose
from 262,000 vehicles in 1976 to 600,000 in 1982, companies like
rival Lohia Machines had difficulty meeting demand. Bajaj Auto's
advance orders for one of its new mini-motorcycles amounted to $57
million. Work on a new plant at Waluj, Aurangabad commenced in
The 1986-87 fiscal year saw the
introduction of the Bajaj M-80 and the Kawasaki Bajaj KB100
motorcycles. The company was making 500,000 vehicles a year at this
Although Rahul Bajaj credited
much of his company's success with its focus on one type of product,
he did attempt to diversify into tractor-trailers. In 1987 his
attempt to buy control of Ahsok Leyland failed.
The Bajaj Sunny was launched in
1990; the Kawasaki Bajaj 4S Champion followed a year later. About
this time, the Indian government was initiating a program of market
liberalization, doing away with the old 'license raj' system, which
limited the amount of investment any one company could make in a
A possible joint venture with
Piaggio was discussed in 1993 but aborted. Rahul Bajaj told the
Financial Times that his company was too large to be considered
a potential collaborator by Japanese firms. It was hoping to
increase its exports, which then amounted to just five percent of
sales. The company began by shipping a few thousand vehicles a year
to neighboring Sri Lanka and Bangladesh, but soon was reaching
markets in Europe, Latin America, Africa, and West Asia. Its
domestic market share, barely less than 50 percent, was slowly
By 1994, Bajaj also was
contemplating high-volume, low-cost car manufacture. Several of
Bajaj's rivals were looking at this market as well, which was being
rapidly liberalized by the Indian government.
Bajaj Auto produced one million
vehicles in the 1994-95 fiscal year. The company was the world's
fourth largest manufacturer of two-wheelers, behind Japan's Honda,
Suzuki, and Kawasaki. New models included the Bajaj Classic and the
Bajaj Super Excel. Bajaj also signed development agreements with two
Japanese engineering firms, Kubota and Tokyo R & D. Bajaj's most
popular models cost about Rs 20,000. 'You just can't beat a Bajaj,'
stated the company's marketing slogan.
The Kawasaki Bajaj Boxer and the
RE diesel Autorickshaw were introduced in 1997. The next year saw
the debut of the Kawasaki Bajaj Caliber, the Spirit, and the Legend,
India's first four-stroke scooter. The Caliber sold 100,000 units in
its first 12 months. Bajaj was planning to build its third plant at
a cost of Rs 4 billion ($111.6 million) to produce two new models,
one to be developed in collaboration with Cagiva of Italy.
New Tools in the 1990s
Still, intense competition was
beginning to hurt sales at home and abroad during the calendar year
1997. Bajaj's low-tech, low-cost cycles were not faring as well as
its rivals' higher-end offerings, particularly in high-powered
motorcycles, since poorer consumers were withstanding the worst of
the recession. The company invested in its new Pune plant in order
to introduce new models more quickly. The company spent Rs 7.5
billion ($185 million) on advanced, computer-controlled machine
tools. It would need new models to comply with the more stringent
emissions standards slated for 2000. Bajaj began installing Rs 800
catalytic converters to its two-stroke scooter models beginning in
Although its domestic market
share continued to slip, falling to 40.5 percent, Bajaj Auto's
profits increased slightly at the end of the 1997-98 fiscal year. In
fact, Rahul Bajaj was able to boast, 'My competitors are doing well,
but my net profit is still more than the next four biggest companies
combined.' Hero Honda was perhaps Bajaj's most serious local threat;
in fact, in the fall of 1998, Honda Motor of Japan announced that it
was withdrawing from this joint venture.
Bajaj Auto had quadrupled its
product design staff to 500. It also acquired technology from its
foreign partners, such as Kawasaki (motorcycles), Kubota (diesel
engines), and Cagiva (scooters). 'Honda's annual spend on R & D is
more than my turnover,' noted Ruhal Bajaj. His son, Sangiv Bajaj,
was working to improve the company's supply chain management. A
marketing executive was lured from TVS Suzuki to help push the new
Several new designs and a dozen
upgrades of existing scooters came out in 1998 and 1999. These, and
a surge in consumer confidence, propelled Bajaj to sales records,
and it began to regain market share in the fast-growing motorcycle
segment. Sales of three-wheelers fell as some states, citing traffic
and pollution concerns, limited the number of permits issued for
In late 1999, Rahul Bajaj made a
bid to acquire ten percent of Piaggio for $65 million. The Italian
firm had exited a relationship with entrepreneur Deepak Singhania
and was looking to reenter the Indian market, possibly through
acquisition. Piaggio itself had been mostly bought out by a German
investment bank, Deutsche Morgan Grenfell (DMG), which was looking
to sell some shares after turning the company around. Bajaj attached
several conditions to his purchase of a minority share, including a
seat on the board and an exclusive Piaggio distributorship in India.
In late 2000, Maruti Udyog
emerged as another possible acquisition target. The Indian
government was planning to sell its 50 percent stake in the
automaker, a joint venture with Suzuki of Japan. Bajaj had been
approached by several foreign car manufacturers in the past,
including Chrysler (subsequently DaimlerChrysler) in the mid-1990s.
Employment fell from about 23,000
in 1995-96 (the year Bajaj suffered a two-month strike at its Waluj
factory) to 17,000 in 1999-2000. The company planned to lay off
another 2,000 workers in the short term and another 3,000 in the
following three to four years.
Bajaj Auto Finance Ltd.; Bajaj Auto Holdings Ltd.; Bajaj Electricals
Ltd.; Bajaj Hindustan Ltd.; Maharashtra Scooters Ltd.; Mukand Ltd.
Honda Motor Co., Ltd.; Suzuki Motor Corporation; Piaggio SpA.
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