Declining sales and sliding margins are compelling two-wheeler makers such as Bajaj Auto [Get Quote], Hero Honda and TVS [Get Quote] Motors to rejig strategy, to cope with the slowdown.

Bajaj Auto, the country's second largest two-wheeler manufacturer, hopes to make magic by offering customers a value-added machine with more power (125 cc) but the same mileage of a 100 cc bike, but at a price much lower than that would be charged for a bigger bike.

Bajaj expects that its new 125 cc Exceed, to be launched next month, will revive sales and turn things positive in the next six months. "The future of the company depends on this bike," Bajaj Auto managing director, Rajiv Bajaj, said in an interview recently.

Bajaj has announced a passenger car project with French car maker Renault that may hedge its dependence on two-wheelers. But that will take some time as the project is expected only by 2011.

Bajaj has said that it would make the engine for the car, which will be manufactured by Renault. This is probably the first time that a foreign auto company will have a technology tie-up with an Indian company and not vice-versa.

Till then, Exceed will have to work the magic. The company hopes to sell over 50,000 bikes monthly, which is more than 40 per cent of its total current sales. And, of course, the new bike offers better margins.