With the scooter market in the dumps, and Hero Honda reigning supreme in the motorbike segment, Bajaj Auto hasn't had it this bad in decades.

By  Roop Karnani

Zero growth last year, negative growth in the current, the prospect of losing pole position by the year-end, the stock sliding to a new low every other day, a 78 per cent crash in profits... things never looked bleaker for Bajaj Auto Ltd (BAL). Compounding its misery is Hero Honda's third-quarter performance, a 45 per cent rise in sales and profits. And, yes, Hero Honda is set to snatch the No. 1 slot in the two-wheeler market from Bajaj Auto by March 31, 2001.

Rahul Bajaj will be quick to tell you that ''the two quarters (this year's third, and last year's corresponding three months) are just not comparable.'' The BAL chairman has a point. In the latest quarter, BAL provided Rs 26.5 crore for vrs-related payments. Then, there's the other income factor. As Sanjeev Bajaj, General Manager (Finance), BAL, explains: ''Our profits are from two sources: operations and other income, mainly from stockmarket investments.'' BAL was sitting on reserves of Rs 2,500 crore last year. In that year's third quarter, the markets were booming, and that's when BAL had booked profits. ''This year the markets are down, and our reserves have dropped by Rs 800 crore, the sum used to buy back our shares,'' says Bajaj jr.

But the Bajaj family just can't escape the fact that it is losing marketshare more rapidly than ever. According to the Society of Indian Automobile Manufacturers, the combined marketshare of Bajaj Auto and its subsidiary, Maharashtra Scooters slid to 50 per cent in the first eight months of the fiscal against 56.1 per cent in last year's corresponding period. Says BAL Vice-President R.L. Ravichandran, 50: ''the downslide has been halted. But we will be able to reverse the trend only after the launch of 'Fusion', a four-stroke scooter, and 'Acer', a mobike. These are due to be launched in April and their effect will be felt in the second quarter of the next fiscal.''

This financial year, however, will still belong to Hero Honda. As on December 31, 2000, Hero Honda was running neck-and-neck with Bajaj. In the first nine months of the year, Hero Honda sold 7.55 lakh bikes, against BAL's 7.63 lakh two-wheelers. But even that wafer- thin lead won't last. Simply because a year of negative growth is staring Bajaj in the face. And Hero Honda? Well, it's been growing at 35 per cent for the past two years. And if the scooter market shrinks by 10 per cent and Hero Honda manages to grow at even 25 per cent this year and the next, it will be enough to push BAL to No. 2 slot, by March 31, 2001.

So what's going wrong for the yesteryear's king of the road? Says BAL's vice-president R.L. Ravichandran: ''Against the first nine months of last year, the scooter market has shrunk by as much as 33 per cent. This is especially true of geared scooters like the Chetak, one of our top sellers.''

Now everyone knows how heavily BAL relies on scooter sales. Of the eight lakh two-wheelers BAL sold in the first nine months of 1999-2000, 5.1 lakh were geared scooters. The current year's figures don't look too good. In the first three quarters, BAL has sold just 3.5 lakh geared scooters. Monthly scooter sales have dropped sharply from 55,000 last year, to 33,000.

Betting on Bikes

The silver lining for Bajaj is that the shrinkage in scooter sales has been compensated by a 35 per cent growth in motorcycle volumes, up to 4.2 lakh in the first nine months, from 2.9 lakh in last year's corresponding period. But here too analysts question the price BAL has had to pay. Huge discounts have been given on the Boxer at and the Caliber to up sales from 21,000 a month last year to 35,000 a month this year. ''What's wrong with discounts?'' asks Ravichandran. ''Can't we buy marketshare? Moreover, we have withdrawn the discounts during the last three months,'' he adds.

Competitors point out that the discounts are still on in some states. But what's more worrisome is the constant tinkering BAL has been up to with some of its products. ''Now they have two different models of the Caliber in some states. This is confusing. They are killing the Caliber by making too many changes too soon,'' says one competitor. ''I think it's near panic in Bajaj Auto, as far as motorcycles are concerned,'' he adds.

That may seem an exaggerated claim, but the truth is Hero Honda is the leader, by far, in motorcycles. It sells 85,000 bikes a month. Now, all of Bajaj's sales tot up to just 80,000 per month. And that's the way things are likely to stay till March. Hero Honda expects to maintain its sales in the next couple of months. ''We will continue to sell at least 85,000 bikes a month in January, February, and March, 2001,'' claims Atul Sobti, 46, senior vice-president (sales), Hero Honda. Ravichandran is miffed. ''Hero Honda is a blessed company and with just a single product we don't know how it is managing to grow at the rate that it is growing,'' he shrugs.

''There is no miracle here,'' pipes in Sulajja Firodia Motwani, 30, CEO, Kinetic Motor Company. ''Hero Honda is the leader in a rapidly growing segment. Its bikes-particularly the Splendor-are perceived as the most reliable by consumers. The others, including Bajaj, are still struggling,'' she explains. ''Although Bajaj Auto leads in geared scooters, this market is shrinking rapidly and I don't think this trend can be reversed,'' she adds.

Late last month BAL launched the 'Eliminator', a 175-cc two-stroke bike. Pulsar, a 175-CC four-stroke bike, is slated for launch in April. ''But both these are top-end bikes and will not give volumes,'' says a competitor. ''It's Acer that might give them the volumes they need.''

Madhur Bajaj, Executive Director, BAL, prefers to focus on the company's concern for shareholders, by pointing to its recent share buyback. ''Shareholders should be grateful because we bought back the shares at Rs 400, when the market price was Rs 320.'' At the time this article went to press, the BAL stock had hit an historic low of Rs 250. Well, if you can't create shareholder value, a buyback is one way out. As one analyst suggests, tongue firmly in cheek: ''Maybe it's time for Bajaj to announce his next buyback offer.''

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