In short, can the Hero Honda-Bajaj Auto rivalry ever end up in a result where Bajaj becomes #1? Clearly, this story is as much about Bajaj as it is about Honda; for the historic gripes of rivalry, which had till now only included moves, counter moves, claims, counter claims, has now become a testy, take-no-prisoners war by Pawan Chabra
Once upon a time, the demand for Bajaj two-wheelers exceeded supply by 2600%. Once upon a time, Bajaj was proud to maintain that it had no need for a marketing department but only for a sales department. Once upon a time... was long back in the ‘80s.
Bajaj made its first mistake during that time in the ‘80s by reading the Indian two-wheeler market wrong. They never imagined that their ‘loyal’ Indian consumer base would fall for the spin being spun by a cycle company (Hero Cycles) who’d set up a JV with a Japanese company, peddling the tag line of filling it, shutting it, and forgetting it too! They were wrong – grandiosely. Hero Honda, banking on the latest technology, changed the equations in no time. In alliance with its Japanese partner, Honda Motor Company, it dethroned Bajaj Auto as the market leader in the late-1980s, a position that remains elusive for Bajaj even today.
Even in 2006, with increasing sales, when the shadow of leadership was quite visible around the corner for Bajaj one month (the company needed to sell just 30,000 units more that particular month), Bajaj mysteriously decided to ignore the entry-level segment and started focusing on the premium segment to grab higher margins. The move opened the gates for Hero Honda took a seemingly unassailable and massive lead. “The competition got it a little wrong, we got it a little right; that has empowered us to stay as market leaders despite high competition,” says to B&E Anil Dua, Senior Vice President – Marketing & Sales, Hero Honda Motors. And after that year, Hero Honda has been filing record sales in the two-wheeler market and has been the undisputed number one in the two-wheeler industry. Can Bajaj Auto change this podium call ever?
Truthfully, there’s no telling. Bajaj Auto has been regularly browbeaten by setbacks through their corporate history, and many of their own making – but Bajaj Auto isn’t exactly faltering either. Analysts are quite certain that his moves are paying off for the company. There obviously are a few ghosts to handle.
“Bajaj is still away from the #1 position in the two-wheeler segment; but has aggressive plans to increase its market share over the next couple of years. It has a better business strategy by diversifying business and product portfolio through the KTM acquisition and JV with Nissan for a small car, as it will de-risk Bajaj Auto’s business model in long run,” says Vaishali Jajoo, Auto analyst, Angel Broking, to B&E. Hero Honda, on the other end, has been able to crank up the cash registers by banking solely on the two-wheeler segment. However, it hasn’t been the ultimate benchmark in core focus either, as the Hero group is today present in sectors like auto ancillaries, consulting and financial services. But the company hasn’t really been able to make a mark beyond Hero Honda. Pawan Munjal, MD, Hero Honda Motors agrees while talking to B&E, “The Munjals have diversified in other areas, but they’ve not gotten there. We have Mindmine, automotive parts; in a small way even in financial services with FinLease. In the earlier days, we thought it best to remain in our core domain. But going forward, we will be looking to diversify into unrelated areas as well.” Irrespective of that, there’s no gainsaying the fact that Hero Honda will have a tough time defending its high volumes in the domestic two wheeler market, and most from the unrelenting Bajaj Auto.
Once upon a time, the demand for Bajaj two-wheelers exceeded supply by 2600%. Once upon a time, Bajaj was proud to maintain that it had no need for a marketing department but only for a sales department. Once upon a time... was long back in the ‘80s.
Bajaj made its first mistake during that time in the ‘80s by reading the Indian two-wheeler market wrong. They never imagined that their ‘loyal’ Indian consumer base would fall for the spin being spun by a cycle company (Hero Cycles) who’d set up a JV with a Japanese company, peddling the tag line of filling it, shutting it, and forgetting it too! They were wrong – grandiosely. Hero Honda, banking on the latest technology, changed the equations in no time. In alliance with its Japanese partner, Honda Motor Company, it dethroned Bajaj Auto as the market leader in the late-1980s, a position that remains elusive for Bajaj even today.
Even in 2006, with increasing sales, when the shadow of leadership was quite visible around the corner for Bajaj one month (the company needed to sell just 30,000 units more that particular month), Bajaj mysteriously decided to ignore the entry-level segment and started focusing on the premium segment to grab higher margins. The move opened the gates for Hero Honda took a seemingly unassailable and massive lead. “The competition got it a little wrong, we got it a little right; that has empowered us to stay as market leaders despite high competition,” says to B&E Anil Dua, Senior Vice President – Marketing & Sales, Hero Honda Motors. And after that year, Hero Honda has been filing record sales in the two-wheeler market and has been the undisputed number one in the two-wheeler industry. Can Bajaj Auto change this podium call ever?
Truthfully, there’s no telling. Bajaj Auto has been regularly browbeaten by setbacks through their corporate history, and many of their own making – but Bajaj Auto isn’t exactly faltering either. Analysts are quite certain that his moves are paying off for the company. There obviously are a few ghosts to handle.
“Bajaj is still away from the #1 position in the two-wheeler segment; but has aggressive plans to increase its market share over the next couple of years. It has a better business strategy by diversifying business and product portfolio through the KTM acquisition and JV with Nissan for a small car, as it will de-risk Bajaj Auto’s business model in long run,” says Vaishali Jajoo, Auto analyst, Angel Broking, to B&E. Hero Honda, on the other end, has been able to crank up the cash registers by banking solely on the two-wheeler segment. However, it hasn’t been the ultimate benchmark in core focus either, as the Hero group is today present in sectors like auto ancillaries, consulting and financial services. But the company hasn’t really been able to make a mark beyond Hero Honda. Pawan Munjal, MD, Hero Honda Motors agrees while talking to B&E, “The Munjals have diversified in other areas, but they’ve not gotten there. We have Mindmine, automotive parts; in a small way even in financial services with FinLease. In the earlier days, we thought it best to remain in our core domain. But going forward, we will be looking to diversify into unrelated areas as well.” Irrespective of that, there’s no gainsaying the fact that Hero Honda will have a tough time defending its high volumes in the domestic two wheeler market, and most from the unrelenting Bajaj Auto.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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