Bajaj bikes face stiff competition

Rajiv Bajaj, Managing Director Bajaj Auto.

Rajiv Bajaj, Managing Director Bajaj Auto.

EPA
Analysts doubt whether Indian motorcycle manufacturer Bajaj Auto's relatively late entry to Russian motorcycle market will be successful because Chinese and local manufacturers already dominate this space. However, Russian consumers may trust Indian brands more than Chinese ones.

Bajaj Auto, India’s third largest two-wheeler manufacturer, is exploring Russia's yet small but rapidly growing motorcycle market. Bajaj has already finalized a distributor in Russia and has recently shipped several containers.

"We estimate the commuter motorcycle segment to be at about 25,000 units pa. This may increase with improvements in the economy. We will target the commuter segment of motorcycles particularly in the 125 cc to 250 cc range," Rakesh Sharma, President International Business, Bajaj Auto Ltd told in the interview with RIR.

Rakesh Sharma added that Bajaj Has been already operating in Ukraine and for the moment will focus on Russia and Ukraine. "But since Belarus and Azerbaijan are integrating with the Russia Customs Union, it will seek to make an entry there too," he added.

According to the company’s latest Annual report, in FY2015, Bajaj Auto sold over 3.29 million motorcycles in India and abroad, 15.5 per cent lower than in 2014, due largely to lack of consumer demand. However, Bajaj's exports increased by 14 per cent to 1.81 million units, worth over US$ 1.5 billion in 2015.

Bajaj is India's largest exporter of two and three-wheelers. “It exports to 62 countries and enjoys No.1 or No.2 position in 20 of them. During FY2015, exports accounted for 46.2% of the Company’s net sales,” the annual report states. It also notes strong market share improvements across South Asia, West Asia, Latin America and Africa.

Its “Discover” and “Pulsar” models continued to gain market share in the key markets like Colombia, Central America, Egypt, Sri Lanka and Bangladesh, while “Boxer”, the cheapest model, continued to not only hold the market share in Africa, but gained at the expense of Chinese brands in the East African and Nigerian markets, the report says.

Bajaj Auto is planning to sell its ‘Pulsar’ range of motorcycles in Russia. Industry experts welcomed the move since the mass market segment is booming, but point to an overall drop in motorcycles sales since 2015 began, due to economic uncertainties and the sinking ruble. They also note tough competition from Chinese and local brands.

Russian moto

AUTOSTAT analytic agency estimated Russian motorcycle market at 30,200 vehicles in 2014, up by 52.5 per cent from 2013 figure. However, in first six months of 2015, sales of new motorcycles dropped by 33 per cent to 12,053 vehicles. The TOP 10 brands account for over 70 per cent of the market sales.

The Chinese motorcycle brand ‘Racer’ registered significant growth in 2015 and emerged as the market leader in Russia. Racer's sales increased 11.5 per cent, to 1607 vehicles.Racer has been in Russia for 10 years and has a country-wide distribution network.

Irbis is the number 2 brand. Motorcycles manufactured by Beijing Irbis Trading Co. Ltd in China are sold as ‘Irbis’ by Irbis Motors, a part of ITX Group, one of Russia's largest suppliers. Irbis Motors has a network of 2000 dealers across Russia and led the market in 2014 with 4,800 vehicles, but sales fell 34 per cent in 2015, to 1,587 vehicles, bringing it to second place in the AUTOSTAT ranking. 

BMW is the third largest brand, with 1,094 vehicles sold in 2015’s first six months. They are followed by Stels and Yamaha, that sold less than 1000 vehicles in 2015,and by Kawasaki, Honda, Lifan, Harley Davidson and Baltmotors, with sales between 650 and 300 units.

"We are aiming for leadership in the motorcycle segment of the 2 Wheeler market and we are aware that effectively business will happen only in 6-8 months of the year," Rakesh Sharma of Bajaj Auto told RIR. "This has been factored into our internal estimates and plans. We will be aiming to achieve 10% market share in 2016 and hopefully, leadership with 25% market share by 2019".

Azat Tinerkhanov, leading analyst with AUTOSTAT, told RIR that Bajaj Auto motorcycles will most probably compete with budget segment models of Racer, Stels, Irbis and Lifan brands.

“The competition (with Chinese manufacturers) will be possible if the products of the same price category will have not only similar specifications but similar operational characteristics such as reliability, manoeuverability, maintainability,” Irbis spokesperson told RIR.

While St. Petersburg and Moscow remain the largest markets for premium and luxury motorcycle brands, South Russia is where the climate gets warmer for most budget segments. Motorcycles, however, can only be used around five months a year in Russia.

“Frankly speaking I feel it is quite late for the Indian player to enter Russian market with these kinds of models. This segment is full of similar models of Chinese origin, and they have been there for at least ten years,” a source in Velomotors (selling Stels motorbikes) told RIR.  “If Bajaj could bring KTM bikes or some superbike models with high engine capacity, they would definitely secure some market share in Russia”.

Bajaj is not the first Indian motorcycle brand to explore the Russian market. Eicher Motors Limited (EML), manufacturing legendary Royal Enfield motorcycles in Chennai, has been selling these mid-size motorcycles in Russia for three years.

“About 500 Royal Enfield bikes have been sold in Russia in past three and half years through various channels,” Andrey Fateev, sales manager at Moscow-based Moto-classica showroom told RIR. He said Russian consumers are likely to prefer Indian manufacturers to Chinese ones since there is more trust in Indian quality and performance, probably, due to experience that Russian moto-fans had with Royal Enfield bikes.

Bajaj Auto and Eicher Motors Limited refused to comment for this story.

TOP-10 BRANDS in RUSSIAN MARKET

BRAND6 months 20156 months 2014Dynamics (%)
RACER16071441+11,5
IRBIS15782557-37,9
BMW10941302-16,0
STELS9751787-45,4
YAMAHA8431667-49,4
KAWASAKI6441012-36,4
HONDA5331253-57,5
LIFAN495580-14,7
HARLEY DAVIDSON411617-33,4
BALTMOTORS297439-32,3
Total market1205317968-33,0

Source: AUTOSTAT

TOP-10 MODELS in RUSSIAN MARKET

Model6 months 20146 months 2015Dynamics (%)
RACER RC200593561-5,4
RACER RC25034448641,3
YAMAHA YBR 125796445-44,1
LIFAN LF 200344295-14,2
IRBIS TTR250R2792800,4
RACER RC150293269-8,2
STELS ENDURO18620811,8
STELS FLEX449204-54,6
BMW R1200GS281201-28,5
IRBIS VIRAGO361189-47,6
Total number sold1800012067-33,0

Source: AUTOSTAT

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