RESEARCH REPORT ON PROBLEMS OF BAJAJ 3 WHEELERSBAJAJ VS TVS KING

3/29/2010

MARKETING RESEARCH PAPER-1

PRIYANKA MULLICK

INTRODUCTION:

Bajaj Auto an India based company is a manufacturer and marketer of two and 3-wheeler vehicles which include scooters,motorcycles,passenger carriers and good carriers. The company operates in India with headquarter in Pune.

After at least two decades as India’s dominant three-wheeler(popularly known as the auto-rickshaw) maker, Bajaj Auto Ltd, already struggling with sagging motorcycle volumes, is losing ground to smaller rivals like TVS,Piaggio,Mahindra & Mahindra. Bajaj, the first to introduce three-wheelers on Indian roads in 1961, has sold around 3.5 million of them, commanding almost half the market share in the passenger-carrier segment. Mahindra and Mahindra Ltd launched its first Champion range of three-wheelers in 2001. The latest is TVS, which entered this space in 2008 with the TVS King brand.

OBJECTIVE :

The company recorded revenues of INR 84,460.3 million during FY ended March 2009,a decrease of 2.5% compared to FY 2008.The operating profit of the company was INR 10,937 million during FY 2009, a decrease of 8.6% compared to FY 2008.The net profit was INR 5,357.9 million in FY 2009,a decrease of 28.5% compared to FY 2008.

This indicates that Bajaj Auto is constantly losing market share with declining sales.

3 wheeler ie. Auto rickshaw segment has been the mainstay for Bajaj over the years. But it was also treated in the same way as the scooter segment and the company has been paying a huge price for it. Sensing an opportunity, other smart automakers, like Tata Motors Ltd, Piaggio Vehicles Pvt Ltd, TVS Motors and Mahindra and Mahindra Ltd (M&M) entered the light commercial vehicle (LCV) market.Bajaj is slowly losing grounds in the competition and market share of Bajaj is gradually decreasing every year.

Our objective is to find out the reasons for the problems Bajaj is likely to face in the future due to entry of various competitors in 3 wheelers segment and provide recommendations for this problem.

DECLINING MARKET SHARE:

2006-07 2007-08 2008-090

10

20

30

40

50

60

70

80

90

Bajaj Auto’s market share is falling significantly over the past years, even when the three-wheeler market has grown by a compounded annual growth rate (CAGR) of 18%. During the year 2008 to 2009, Bajaj’s market share in three wheeler passenger and commercial vehicle segment fell to 63.6% and 12%, respectively from 70.3% and 20%, during the previous year. While the 3-wheel industry registered 10.3% year-on-year growth, Bajaj's production grew by just 0.3%.

2007-08 2008-09Rate of growth

Passenger vehicle sales

Industry sales 375,180 415,411 10.7%

Bajaj Auto sales 263,598 264,332 0.3%

Bajaj Auto market share

70.3% 63.6% (6.7%)

BAJAJ THREE-WHEELER SALES (IN NUMBERS)

Source: SIAM and Company data

CURRENT MARKET SHARE OF COMPETITORS:

bajajtvsothers

In the three-wheeler passenger carrier (popularly known as the auto-rickshaw) segment, during November 2009, Bajaj and Piaggio were able to register an increase of 61.3% and 68% in sales, respectively. M&M and TVS Motors clocked a growth of 133% and 211%, respectively. The rising sales of competitors are sounding the alarm bells for Bajaj, as vehicles from both M&M and TVS Motors offer better features and performance than Bajaj's auto-rickshaws

Bajaj still tops the passenger auto rickshaw segment, which accounts for 63.6% of the three-wheeler market. Its market share in the passenger segment is smaller than last year’s. But with the segment expanding with newer players, Bajaj’s dominance in the three-wheeler segment will continue to be threatened. The new entrants, with lower bases, is continuing to grow at a faster pace

COMPETITOR’S ANALYSIS:

TVS KING:The main competitor of Bajaj 3 wheelers,to whom Bajaj is gradually losing market share is TVS King.

Despite being a relatively new entrant in the three-wheeler segment, TVS Motor Company is eyeing a dominant share of the market within the next three years

TVS launched its first three wheeler - The King in Chennai on March 2008.

The company is launching the King in a very gradual manner, as sales have started in the states of Tamil Nadu, Andhra Pradesh, Kerala,West Bengal and Gujarat.

The three-wheeler, available in CNG, LPG diesel and petrol versions, has an electric start and is priced in the range of Rs 90,000 to Rs 1.30 lakhs.

The autorickshaw is a modern low friction, seven port engine, that is highly fuel efficient. Also, the engine operates at lower revolutions for a given road speed, thereby, improving its reliability.

Styling and comfort is far better than many other rivals in segment.

Fuel Efficiency is said to be 30 Kmpl due to its low friction 200 cc two stroke engine.

 A 4-stroke version of the king is also in the pipeline.

The company has promised a good mileage and a higher capacity engine, with the peak torque at lower RPMs.

Standard accessories include a water bottle holder and a magazine holder and optional accessories include wheel covers, FM radio, a digital clock, an idol stand, floor mats and an additional rear bumper.

The company has added attractive features to the vehicle including a car-like dashboard with fuel level indicators and mobile phone charging socket, dual tone high quality seats, and an integrated bumper.

SPECIFICATIONS TVS KING BAJAJ

Engine 4 stroke 4 stroke

Displacement 173cc 145.45 cc

Compression Ratio MaxPower

8.17bhp 7 bhp

Fuel Tank Capacity 8 litres 8 litres

Maximum Payload 335 Kg 333 Kg

Mileage 35 km/lit 30 km/lit

price 90,000-1.3 lakhs 90,000-1.2 lakhsSpeed 50 kmph 55 kmph

http://www.auto-rickshaw.com/autorickshaw-3-seater.html

SALES REPORT OF TVS KING:

At present, TVS King has a market share of 10 to 40 percent varying among different towns.

Sales of three wheelers stood at 1212 units in the month of December 2009 as against 321 units registered in December 2008. Cumulative three wheeler sales for the period April to December 2009 stood at 8,707 units.

COMPETITIVE STRATEGY OF TVS:

Family welfare schemes for the autodrivers of tvs

Going beyond the product, TVS Motor Company also announced several family welfare schemes for autodrivers and their families to attract more customers:

The company will offer all TVS King owners a one year free accident and healthcare policy. TVS Motor Company has tied up with several insurance company for the same.

This policy will cover the owner and his family i.e. wife and children against medical care upto Rs. 30,000 per annum on a floater basis.

The owner will additionally be covered by a personal accident policy for one lakh rupees.

Given that auto drivers are cultural ambassadors, TVS Motor Company also announced a novel training program to enhance the image of these drivers and thereby create an atmosphere where these drivers enjoy their work as well.

Through this program, TVS King drivers would be provided with training in courtesy and friendliness. They will also be given training in safety and preventive maintenance.

TVS Motor Company also announced another unique recognition scheme to promote education through which the company will recognize and reward children of TVS King Owner Drivers who secure the three highest marks in Class X and Class XII examinations in each state in our country .

DRIVER’S VIEW ON TVS AUTORICKSHAW

As per the interview of a TVS King owner taken by our group,we found he was very much satisfied with the product and its service and the attractive offer that comes with it.

The engine operates at lower revolutions for a given road speed thereby improving the reliability of the engine.

TVS King’s electric start option reduces driver's fatigue.

TVS King redefines all performance characteristics like initial pickup and power, comfort, convenience, fuel efficiency, reliability and safety to give pride of ownership to the driver.

Refined quality and engineering skills ensure that the TVS King will deliver high value to its customers both in terms of styling and efficiency.

Much harder and stronger than bajaj auto.

TVS’s mileage is 35 and Bajaj’s is 30.So TVS is much better.

Comfortable seats with velvet cover.

It has attractive additional features like magazine holder,water bottle holder for convenience

After so many positive points TVS has the same price as Bajaj.TVS has so many Competitive advantages over Bajaj.

According to the driver’s view TVS auto will surely takeover Bajaj very shortly.

PASSENGER’S VIEW ON TVS AUTORICKSHAW:

Attractive interiors that add to the styling of the vehicle include an attractive dashboard, dual tone high quality seats, and an integrated bumper.

Better head & legroom in the customer’s compartment.

The comfortable seat is positioned so as to optimize superior ride quality for longer duration.

Better speed and runs faster than Bajaj auto.

TVS auto provides with water bottle holder, magazine & newspaper holder and a fire extinguisher. These are not provided by Bajaj auto.

We found that, the passengers are very happy and satisfied after riding a TVS auto

According to the customer’s view TVS is going great and is much better than Bajaj auto in looks, comfort and other additional features.

We Say

TVS is always good in doing refinement and they are bold in accepting good things of other as well as incorporating their own. They concentrate on those minor aspects which are usually overlooked by others. In this Autorikshaw too, we can see comfort and interiors are not like those hand made but are designed professionally. Though overall look is as a normal three wheeler but inners are well finished. We hope that this will turn out to be a good sign for Auto rickshaw where up till now comfort was not a matter to look upon.

PRODUCT DEVELOPMENT OF TVS KING:

Despite being a relatively new entrant in the three-wheeler segment, TVS Motor Company is eyeing a dominant share of the market within the next three years,with continuous product development and new models launch

company launched TVS King ZS, an all new green, environmental friendly four stroke CNG auto rickshaw for New Delhi & NCR

TVS King ZS is India's first 200 cc, four stroke, electric-start, CNG auto rickshaw equipped with factory fitted CNG kit that delivers superior performance

It is a futuristic product designed for today's cities and has a good combination of `power, comfort, mileage and style.

TVS Motor Company, in October 2009, launched TVS King Arjun and TVS King LS in Kolkata and Bangalore respectively

TVS King Arjun is an all new green, 4 Stroke LPG mono fuel autorickshaw designed specially to conform exclusively to the norms of the West Bengal State Government for Kolkata City.

TVS King Arjun, India's first 200 cc, 4 Stroke LPG mono fuel with electric start is a futuristic environmental friendly product designed for today's cities having a good combination of power, style, comfort and mileage.

TVS Motors is perhaps the first to seize the opportunity headlong with its hybrid three-wheeler that runs on petrol, CNG and an electric battery

The three-wheeler gives 60 km to the litre against the Bajaj CNG vehicle. It's also got a host of other features like a MP3 player and reclinable seats

it's also driver-friendly in the sense that its control panel is fabricated of collapsible plastic so that the driver doesn't get trapped in the unfortunate event of an accident.

MARKETING MYOPIA OF BAJAJ:

Despite being the market leader and enjoying a monopoly in 3 wheeler market segment for the past 2 decades it is losing its market share with the entry of new competitors with innovative products and attractive features,due to marketing myopia of the company.

The main problems are:

The declining volumes (for Bajaj) are largely due to the lack of innovative products from the company and lack of R&D

The shrinking volumes, also have to do with Bajaj’s focus on cleaner fuels such as compressed natural gas, or CNG, which are not easily available in smaller cities and rural areas

very limited presence in rural segments. focus mainly on the cities

the market price of the competitors with more attractive features are same as that of Bajaj.

an average three-wheeler buyer hails from a lower income group and cannot afford the vehicle without finance.therefore, access to loans for vehicle purchases remains key in a market where three out of four three-wheelers are bought with financing.Bajaj failed to understand this, whereas TVS King has provided the facility of loan to its cutomers.

RECOMMENDATIONS:

Scaling Up Service Centers:

Keeping in line with its growth target for the next 5 years, BAL needs to scale up its service centers both in numbers and in capacity.

Focus on Easy Credit Lending:

In the present economical crisis, Bajaj can utilize its subsidiary, Bajaj insurance in coming up with schemes that will help consumers buy two wheelers on friendly terms.

Investment in Research and Development:

We have already identified that the core competency of Bajaj is its R&D and investment in technology. In order to increase market share and become the market leader, Bajaj needs to invest heavily in R&D. They have to introduce new models of 3 wheelers as well as develop alternate energy options.

Lowering the price:

Lowering the price of the auto may also help Bajaj to keep its position.

Bajaj must put stress on research and find out what the autodrivers want,their grievances the problems(if any) faced by the autodrivers by arranging frequent meetings with them.

CONCLUSION:

Through this research we have tried to identify various factors that would impact growth of the company in three wheeler industry and to retain its market share. We reflected on the importance of innovation and customer demand. To continue being the market leader, Bajaj needs to invest in the right technologies and develop the right products at the right time. Bajaj has shown the willingness to change and thus has been able to achieve strong sales growth in past. To further consolidate its position and gain market share and competitive advantage over the new entrants, in the industry, Bajaj need to overcome its marketing myopia and needs to do strategic rethinking and assess its product focus. The new strategy should also be backed by efficient on the ground customer support and continuous research for product innovation.

BIBLIOGRAPHY:

www.indiainfoline.com/Markets/Company/.../ TVS -Motor.../532343

http://www.auto-rickshaw.com/autorickshaw-3-seater.html livemint.com www.autoindiaforum.com/ tvs -motor-enters-autorickshaw-market.html