Bajaj Auto Ltd.: Overtaken in the Indian Scooter Market

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Case Details:

Case Code : BSTR216
Case Length : 20
Pages Period : 1999-2006
Organization : Bajaj Auto Ltd.
Pub Date : 2006
Teaching Note :Not Available
Countries : India
Industry : Auto and Ancillaries

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"Like Volkswagen Beetle, the product (Bajaj Chetak) had lost its relevance."¹

- Rajiv Bajaj, MD, Bajaj Auto Ltd., in January 2006.

"The scooter segment in India is over one million units and the segment has been witnessing an impressive growth for the past few months. Further, there is a huge untapped segment of women customers, which offers immense growth potential."²

- Pawan Munjal, MD, Hero Honda Motors Ltd., in January 2006.

"Fact is, Bajaj was slow in reading the shift from scooters to motorcycles."³

- An article in Business Today, in 2001.

Introduction

In January 2006, Bajaj Auto Limited (BAL), a major Indian manufacturer of two- and three-wheelers, announced that it had stopped production of Bajaj Chetak, its flagship scooter model.

The Chetak, a geared⁴ scooter, had reigned over the Indian two-wheeler market in the late 1970s to early 1990s and had come to occupy a near-iconic status. According to Rajiv Bajaj (Rajiv), managing director, BAL, the company had produced about 10 million Chetak scooters before the model was discontinued.

In the mid-1940s, BAL started as an importer of two- and three-wheelers. In the early 1960s, BAL, in collaboration with Piaggio⁵, started manufacturing Vespa brand scooters at its plant near Pune, Maharashtra. With its collaboration with Piaggio coming to an end in the early 1970s, BAL started manufacturing scooters under the Bajaj brand.

The Chetak, BAL's first scooter model under the Bajaj brand, was introduced in 1972. In the 1970s and 1980s, scooters dominated the Indian two-wheeler market. Most middle-class Indians preferred scooters because of their durability, low maintenance costs, and versatility, and the Bajaj Chetak name became synonymous with scooters. At that time, the motorcycles available in India were heavier and not as fuel efficient as scooters. They were also costlier.

In the late 1990s, the Indian two-wheeler market witnessed a shift in consumer preferences. The popularity of geared scooters began to wane while that of motorcycles soared. There were various reasons for the shift -India was undergoing a demographic change, with the proportion of younger people in the population growing significantly; the economy was growing, which increased the disposable incomes of the middle class; also, many newer models of motorcycles, with improved designs and modern technology had become available in the market. While these changes were taking place in the market, the features of scooters, especially those of the Bajaj Chetak, remained essentially unchanged.

Bajaj Auto Ltd.: Overtaken in the Indian Scooter Market - Next Page>>

1] "Bajaj slams brakes on Chetak,"www.indiacar.com, January 03, 2006.

2] "Hero Honda launches 'Just4her',"www.herohonda.com, January 20, 2006.

3] Brian Carvalho and Swati Prasad, "Bike Wars,"www.india-today, September 16, 2001.

4] Geared scooters are scooters with manual gear shifts.

5] Piaggio, the Italian two-wheeler manufacturer, was founded by Rinaldo Piaggio in 1884. It started its business by producing rail carriages, goods vans, luxury coaches, engines, etc. In 1917, it started producing aeroplanes. The company was believed to have pioneered the category of scooters, which were sold under the Vespa brand, in 1946.