INDIA BUSINESS WORLD - JULY 1st - JULY 31st - 2008
BAJAJ, RENAULT TO FORM NEW JV FOR AUTO COMPONENTS
THE country’s second largest two-wheeler maker, Bajaj Auto, is forming not one but two joint ventures with Renault, the French carmaker. Last year, Rajiv Bajaj and Carlos Ghosn had announced the setting up of a joint venture to manufacture a $2,500-car. Last month, Renault included its Japanese ally, Nissan, in the project. Bajaj Auto will now form a separate joint venture for the manufacture of engines and transmissions which will support not just the car JV but also Bajaj’s own line of commercial vehicles. Bajaj Auto will hold a controlling 51% in this JV, which will not include Nissan, since it has a tie-up with Ashok Leyland. This JV will be located at the new car plant at Chakan, near here.
“We have our own commercial fourwheeler development project located in our existing facility at Waluj, near Aurangabad, where we used to make scooters. Using these facilities versus setting up a new one means a Rs 250 crore saving for us,” Bajaj Auto managing director Rajiv Bajaj told shareholders at the company’s first annual general meeting.
“We have taken this decision, to form a separate JV for engines and transmissions, in the past few weeks. By mid-2009 we should be rolling out our light truck,” he added. The light truck is expected to come fitted with engines from the new JV.
Bajaj Auto and Renault-Nissan will sign the MoU for the three-way car project later this month when it is expected that the second JV will also be done. Cars from the joint venture will start rolling out of a greenfield facility at Chakan by early 2011. Bajaj Auto will hold a 50% stake in this JV, the balance being held equally by Renault and Nissan.
For the long term, bike maker Bajaj Auto is aggressively eyeing the four wheeler market, with Rajiv Bajaj telling share holders, “In the long term, the four wheelers will replace three wheelers for Bajaj Auto.”
However, for the short term, its three wheeler focus will be on exports since these account for half its total production. Mr Bajaj pointed to the many markets amenable to this product, including those in Africa. The auto OEM will also launch alternate fuel powered three wheelers in the second half of this fiscal. These will CNG and LPG powered variants of its existing passenger carrier, the Mega Max. Bajaj Auto will add technology for its existing three wheeler products, introducing the GDI technology it showcased in December 07. However, since this is an expensive technology, it is hoping for government support in the form of introducing it in time for the Commonwealth Youth Games, to be hosted in the city later this year.
As a two wheeler maker, Bajaj Auto is planning a big splash in the mid market segment, currently dominated by Hero Honda products like the Splendor. “This is a segment which accounts for 35% of the market and we have a zero share of the market. Of course, the XCD 125 has given us a foothold here which will be enhanced with the launch of four new products this year. By March 09, we should be doing 75,000 units per month in this segment, from 25,000 per month sales of the XCD 125 now,” Mr Bajaj said. He stressed that with a 50% market share each in the entry and premium level markets, they hold an overall 32.5% share of the country’s motorcycle market.
Having taken up a stake of just under 25% in the Austrian high end bike maker, KTM Power Sports AG, Mr Bajaj told share holders that the first goal is to double KTM’s production figures from 100,000 annually.
“Based on joint projections, the first bike should be ready by 2010, made at our Chakan bike plant. The benefit of locating at an existing plant is that the technology benefits all our products directly and it becomes very profitable since these are bikes with very good margins. It is a small but profitable business,” Mr Bajaj noted. Responding to share holder queries, Mr Bajaj said they took up the legal issue of protecting the IP of the DTSi technology with TVS of Chennai more to learn the manner in protecting IP.
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