By Arup Chanda
KOLKATA, India, Oct. 4 (Xinhua)-- After a rough solo attempt to foray into the Indonesian market, India's leading two-wheeler maker Bajaj Auto has decided to link up with Japanese motorcycle maker, Kawasaki, and is now ready to market the'Kawasaki Bajaj' motorcycles in Indonesia.
These motorcycles will be assembled at the Chakan plant in India's western state of Maharashtra by Bajaj Auto and distributed by Kawasaki through their network in Indonesia.
The Pulsar 200 NS motorcycle will be the first offering through this tie-up.
Rajiv Bajaj, managing director of Bajaj Auto, however, clarified that the arrangement is not a joint venture but a simple distribution partnership. "We did not think getting into a marketing joint venture was necessary," he said.
Bajaj said that their relation with Kawasaki, which is already 30 years old, was never a joint venture."We were able to sustain it and this is Version 2 of the Kawasaki Bajaj partnership,"he said. "While Bajaj can grow faster with Kawasaki in these markets, Kawasaki can focus on the larger bikes it specializes in so there is no conflict or cannibalization,"he added.
Bajaj had entered the Philippines market with Kawasaki and the strategy 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 percent, 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 Auto's motorcycle exports are at 1.55 million units with revenues of 65 billion rupees (1.18 billion U.S. dollars).
"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 percent subsidiary PT Bajaj Auto Indonesia in 2007. The subsidiary has been on its own as a separate company.
The Bajaj executive said as an entry strategy for Indonesia, they had chosen to go alone as they wanted to understand these markets, the customer behavior and preferences in these markets.
Bajaj said they realized that it would 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 Auto's 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 1378.2 million rupees (25 million U.S. dollars) as of March 31, 2012.
It sold 23,337 motorcycles in FY12 and 21,586 units in FY11.
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 percent market share. We want to make an impact in these markets so we 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 on the back of Kawasaki.