- Assess the role of the CV division and the RE brand in BAL’s portfolio of offerings.
CV division first of all stands for Commercial Vehicles’ division which is part of the Bajaj Auto LTD (BAL). BAL is the flagship company of the Bajaj Group which is operating in a wide range of industries including automobiles, home appliances, lighting, iron and steel, insurance, travel and finance. BAL is divided in three main divisions: the domestic motorcycle business unit, domestic CV unit and the international business unit. BAL was the world’s fourth-largest 2W and 3W manufacturer and the world’s largest manufacturer of 3 Ws. They led the worldwide market with 64 per cent market share; the next competitor had only 19 per cent of the market. BAL had a 51 per cent share of the 3 W markets in India, with a concentration of 88 per cent in the urban market. The CV division was focused on the 3W popularly known as the auto rickshaw.
In the 3 W category the Bajaj RE was available with different variants in gas: diesel, gas and alternative fuel. The RE was added in order to differentiate the vehicles from its competition which had front engines. It had a superior performance and an entrenched perception of value for money.
- The case indicates that for BAL to enter the car market, there were “issues of commercial viability and branding” Do you agree with this statement? Please explain.
Yes, we agree with this statement, as the potential customers are especially from rural areas and Tier 2 cities, whose per capita income and affluence was lower than consumers’ in large cities. Therefore they are only focused on the price and not on added values, such as a strong brand. So the challenges for BAL are to get the costumers attention and awareness towards additional values such as the emotional attachment of possessing a car. This value will be increased by focusing on the development of a vehicle for optimal speed, low emissions and fuel efficiency, which was at that point not given on the market, but was included in the key criteria of decision making for a new vehicle. In addition to that road safety was also an important concern which should be given when buying a new vehicle.
- Is the RE60 a path-breaking product for the company with the potential to disrupt the market? Discuss the product within the context of its market potential, competitor reactions, consumer acceptance, and possible government regulations.
There is a big gap in the Indian transportation market between 3W’s and taxis. India has a mobility problem and changing consumer needs are justifying the creation of a new category that aims at meeting those needs. Being the first company introducing a quadricycle in the market Bajaj has the opportunity to mitigate its first-mover advantage. It represents a big opportunity to rejuvenate the profitable but stagnating CV division. There is a lack of options among CV’s (taxis and auto rickshaws) which represents an opportunity for Bajaj to more precisely meet the needs of the customers with the RE60. The product definitely has the potential to disrupt the market as it is a cost-efficient vehicle that does not have the weaknesses of the traditional auto rickshaws. As Indians depend to a high degree on intermediate public transport the main target market will be the operators. They have to get convinced through a clear value proposition that the RE60 offers a greater profit potential than the RE3. It is still a small and compact vehicle, which is attractive for CV operators due to the heavy traffic on Indian roads. The competition’s reaction showed that Bajaj created an innovative new vehicle with a big potential. It is important that they choose the right branding and positioning strategy. If they will fail another competitor may bring the product to the market leaving no credit for Bajaj. Not only the CV operators but also the end-consumers need to be convinced that it is worth a little more money to use the new RE60. The bad image of 3W auto rickshaws can help to capture a lot of preliminary unsatisfied customers as the RE60 is a huge improvement. It is safer, has a lower pollution and lower fuel use and therefore should be communicated as a more cost-effective way of commercial transport. In order to make sure the customers understand the great value of the vehicle a value proposition for both the vehicle operators and the end-users that clearly highlights and sets it apart from 3W’s needs to be developed. Ultimately also the government will play a significant role in the success of the RE60. The success may be limited by the regulations for new permits that exist in many big cities. Bajaj may have the opportunity to achieve a special agreement as the RE60 would contribute to a lower environmental pollution which presents a big issue in the Tier1 and Tier2 cities. Many 3W’s may get replaced by the new RE60. However there is also a big potential in areas where there is no controlled permits and where no auto rickshaws existed before such as airports and hotels.