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How the sons transformed Bajaj Auto
Surajeet Das Gupta |
February 14, 2005
For someone who is joint managing director of Bajaj Auto, Rajiv Bajaj pleads a technophobia that is almost amusing. He notes down appointments in an old red diary, keeps his mobile switched off most times, and refuses to allow a PC in his office.
But then, he practically operates from the company's test tracks on the outskirts of Pune, driving new prototype mobikes to test their engines, or talking with his R&D team about the best spark plug to use to improve fuel efficiency. His penchant for perfection too is legendary -- he had vendors make 300 seats for a new bike and sat on each one of them to pick out those with the best grip.
In striking contrast, younger brother Sanjiv -- the public face of the company and its executive director -- is a gizmo freak. He shows off his Sony Ericsson PDA mobile phone on which he jots down all his appointments and notes, smirking at those corporate honchos who're still raving over the bulkier Blackberry.
They might be a study in contrast, but Rahul Bajaj's sons are united in a common goal -- to catapult Bajaj Auto as the country's largest mobike company. Once the country's undisputable scooter czars, the Bajajs saw the ground move away from under their feet in the late 90s when customers shifted dramatically from buying scooters to buying mobikes.
Rajiv is candid: "Bajaj was used to customers queuing up for its products, not saying no to it." Worse, five years ago the company was at the bottom of the heap in the mobike market, with Hero Honda, TVS and Yamaha far ahead in terms of market share.
But it has been a remarkable turnaround. Bajaj Auto hopes to end this financial year (2004-05) having revved up 1.5 million bike sales, a growth of over 50 per cent in volume over the last year. It has also grabbed a larger share of the market from its rivals, up from 23 per cent in January 2004 to 28 per cent in January 2005. And the yawning gap between its chief rival Hero Honda (its market share dropped from 53 to 50 per cent in the same period) is reducing each year.
The brothers aren't breathing free of competition just yet. They are working on a new bike in the sub-Rs 30,000 category to take on Hero Honda's Dawn (Rs 29,999) and feed them with large volumes on the one hand, and attempting to reduce the price of their upmarket cruiser bike (The Eliminator, currently at Rs 96,000) to Rs 65,000 by putting in a new Pulsar engine into the mobike.
Fresh out of university with a post-grad in engineering from Warwick, UK, Rajiv knew they had been caught napping when the world and its uncle shifted to riding bikes. The elder Bajaj scion, then a trainee in the family company, found solace only when he went to TPM guru Professor Yamaguchi for help. The guru said, "Business starts when the customer says 'no'," remembers Rajiv.
The Bajaj brothers say the problem was of one of attitude: Bajaj was a scooter company and therefore the mobike department was given second-class treatment (it was only 10 per cent of their business in 1996), the quality of the products was poor, and they did not offer fuel efficiency the way the Japanese bikes did.
In 1997, Rajiv walked into the Aurangabad plant and ordered it shut down. Says Sanjiv: "It was unimaginable and against everything Bajaj had stood for. In 40 years we had never shut production anywhere. But we realised that a shock needed to go through the system." Their father, he says, had not opposed the move.
That was just the beginning. When the brothers discovered that they had over 1,000 vendors supplying them components, many of which were plain bad, Rajiv decided to prune them down to a realistic 200. And the labour force was trimmed down from 23,000 to virtually half that through a VRS scheme. "We had studied in the local school within the premises, had played with many of them, some were our friends," says Sanjiv, "suddenly, we had to let them go."
The challenge was to get the right products at the right price, to bring in Japanese productivity tools to reduce costs just as the competitors were doing. Sanjiv, who had joined the company armed with an MBA from Harvard, says his reading of big companies like Honda, Toyota and Apple had taught him one thing: a successful company needs a good product. But most workers in the Pune plant did not believe you could bring in Japanese management practices into India; there was stiff resistance to the move.
That's when the two brothers made an unusual decision. They decided to set up a new mobike plant but not at their existing facility in Pune. Instead, they chose Chakan, an hour's drive from Pune. Says Sanjiv: "We realised that sometimes people have to be taught by example. That's what we did in Chakan."
Chakan was like a laboratory. There was no concept of workers -- everyone was "staff" -- and the factory had the luxury of a three-hour gap between shifts for maintenance. Productivity levels virtually doubled per worker as compared to the company's Pune plant, and it remains the benchmark to push productivity levels in all other units.
The next challenge was to get the products right. Rajiv took up the cudgels by personally supervising even nitty-gritty details, from the styling and paint to the design of the console, the right grip and even the spark plug to use.
A project for a bike is conceived depending on inputs from the marketing team. The design department then comes up with eight-10 different designs that Rajiv and his team narrow down to three or four. Feedback on the styling is sought through market surveys and, finally, two prototypes of the bike are made. Rajiv & Co work on at least two to three variations of engines, of which one is selected. This takes 24-30 months.
That is how many of their hit bikes were built. Rajiv and Sanjiv found there was a market of customers looking for something more than just a bike for commuting -- they wanted rugged styling and more power. Pulsar (150 cc and 180cc) was born from this market reaction. But Sanjiv notes: "When we conceived the bike, we thought the target audience would be 25-35-year-olds. But when we saw the sales chart, it was being being picked up by 35-45-year-old customers."
The Bajajs say they realised the reason when they saw the stance that riders took while driving the bike -- the product was fulfiling the desire of the riders to take on a youthful persona. Perhaps in the same way the formally dressed executive in the US may drive a Range Rover SUV to create the image of a man who seeks adventure.
Rajiv realised that to crack the 125 cc segment where Hero Honda had been ruling the market was going to require a very strong reason. A market survey showed that Honda's bikes provided reliability. But Sanjiv and Rajiv did not miss out on some key revelations: customers thought that the Honda bikes did not have enough power, and would prefer bikes with superior styling.
Rajiv's mandate to the design department was simple: they would have to build a bike with these two basic qualities without compromising on either price or fuel efficiency. Bajaj Discover was born from this understanding, and the company sells over 25,000 of these bikes every month.
But analysts say the brothers' drive for volumes is already effecting margins. A senior analyst in Motilal Oswal says margins of the company have fallen to 16 per cent (from 18 per cent earlier). He points out: "That they are selling 125 cc bikes at 100 cc prices is cause for worry. They are dependent on the entry level for large volumes. And three-wheeler sales are down."
But Anang Dev Jena, chief of Synovate Motoresearch, argues: "They have shown superior understanding of customers and are projecting the right imagery. But it will be a while before they come near Hero Honda."
The Bajaj brothers are aware that they need to grow faster. Ask Sanjiv and he will tell you that the next stop for them is the global market. And his sojourns in these markets have taught him how they are all different. In Africa, he says, it is the cheap Chinese mobikes that dominate the market -- the Japanese are conspicuous by their absence. "You cannot play the pricing game there," he reasons, "you to have to play on quality at a slightly higher price."
But in South-east Asia, to contend with the Japanese, he says their products would be required to be priced between a Chinese mobike and a Japanese one, but with the quality of a Japanese bike. The good thing is that products like the Pulsar could sell in these markets, eliminating the need to create new bikes. And a beginning has already been made -- Bajaj bikes will now be assembled in its collaborator Kawasaki's factory in the Philippines.
The brothers are more circumspect when you ask them whether the Bajaj brand will shine in China. Instead, they point out that China has over 1,000 manufacturers of two-wheelers, many of them of poor quality being assembled in garages. And they work on hidden subsidies.
Here, Sanjiv narrates a story of his maiden visit to China. He met a well-known manufacturer of a publicly-quoted company who said that while he sold a half-million bikes, he showed only 3.5 lakh on his balance sheet because he does not pay taxes on the rest. But the more interesting part was that the local authorities encouraged him to do so, so he could go out and compete. "Shanghai might look like New York but it is a study in contrasts. On one side you have great infrastructure, and in the interiors you have the poverty of the masses," says Sanjiv.
China might be four years away from Bajaj's debut there, but in the meanwhile the Brothers Bajaj have a long day ahead of them as they battle Hero Honda to take on the top slot on their home turf.
Spot the brother
You might think Rajiv and Sanjiv Bajaj are workaholics, but you'd be wrong. The Bajajs believe in walking to office from home -- a stone's throw away in the Akurdi plant in Pune -- and call it a day by six in the evening. Both believe that work is like a sponge: the more time you give it, the more it soaks in, and that makes no sense.
Their offices are simple to the point of being spartan. Even the conference and meeting rooms are devoid of art. Bajaj Auto insiders say there was a time when Rajiv's room did not have enough space for more than two chairs. Both brothers started their working lives from the shopfloor.
Both have been keen sportsmen and their youthful energy shows. A few years ago you could have spotted Rajiv in the sportsfield playing football with Bajaj employees, till an injury took its toll and got him off the field. Sanjiv played basketball at the all-India level.
Papa Rahul Bajaj is a globetrotter and on the committees of several industry associations, now that the sons have taken over the biz. "Papa starts the day late and sleeps late," says Sanjiv. "And he is always on the phone."
Those who know Rahul Bajaj say he is proud of his sons, and while he comes to the office, he does not interfere in the day-to-day operations of the company.
Work between the brothers is clearly divided. Rajiv, 38, is the products man -- scanning designs, meeting his R&D team, opening up imported bikes and going through them with a toothscanner. Insiders joke about his habit of moving around with the red diary in which he notes all appointments, a habit he picked up from his father. If you have not been entered into his red diary, it might be very difficult for you to meet him. In any case, he keeps away from the media gaze.
Sanjiv, 36, is pushing the company's new thrust into exports. Unlike his brother, he's known to be more sociable. He loves Dire Straits and Pink Floyd, and is childishly excited about his new acquisition, an iPod in which he carries 4,000 songs while on the move. And don't be surprised if you see him at a multiplex seeing an English movie; Hindi movies are okay provided they aren't weepies.
The two brothers might have different lifestyles but they make it a point to meet every day during a workout in the gym at home. And at the dinner table.The Bajaj household is never short of mobikes imported from around the world. Don't be surprised if you see Sanjiv whiz past in a Ducati Monster, his favourite at the moment because of its naked styling. As for their cars, big brother Rajiv drives a BMW, but younger brother Sanjiv who has just been given a Skoda Octavia has his eyes set on a Porsche: "When I have the money, of course," he jokes.