Bajaj Auto rejigs rural markting plan

Indias Second-Largest Two-Wheeler Maker Appoints 135 Dealers & Offers Finance To Customers Without Bank Accounts To Take On Hero Honda

BAJAJ Auto is going at full throttle to challenge market leader Hero Honda in rural and semi-urban markets that account for more than half of two-wheelers sold in the country.

The countrys second largest two-wheeler maker has appointed 135 dealers in small towns and mini metros,where it had only 25 dealers,and will offer special finance scheme for rural customers even if they have no bank account.We are reinventing our marketing and distribution strategy to keep up our growth momentum, said Bajaj Auto motorcycle business president S Sridhar.The key lies in addressing a bigger market, he added.

New dealerships will be operational by March end.Six out of every 10 new dealers are in small towns such as Hingoli in Maharashtras Nanded district,with the rest in mini metros such as Pune and Nagpur.

They will offer a special financing scheme backed by Bajaj Auto Finance with a direct cash collection facility.That is,customers need not provide post-dated cheques to avail of finance;they can pay the instalments in cash.

The loans will be given on the basis of trust and initial verification and there will be no collateral, Sridhar said.The company has already tried this out in select areas and,according to him,default rate is much less than in the post-dated cheque system.
Bajaj Auto is also considering a seasonal collection strategy for rural areas,Sridhar said.This would mean that instead of monthly instalments,rural customers can time their loan repayment to crop cycle,which is 2-3 months for rice and wheat.

Experts feel that the rural initiative will make an immediate impact on the companys business.Bajaj Auto will be able to improve its market share to more than 30% with the rural push, said Fortune Financials analyst Mahantesh Sabarad.But the rising input cost will put pressure on margins, he added.

At present,Bajaj Auto holds a 27% share in the two-wheeler market,dominated by Hero Honda with 54%share.Hero Honda does almost two-thirds of its sales in rural areas,while Bajajs most popular bike in rural areas,Discover,gets 45% of its sales from interior areas.

This number will increase soon.The new initiative will help Bajaj tap the huge potential in rural India much better.

Good rains,increasing crop productivity,high farm product prices have pushed disposable incomes up in rural India.So did the rural job guarantee scheme and development projects that also ensured improved accessibility.

Bajajs Sridhar expects rural markets to grow at a healthy pace for at least 10 years,as at present there are only 18 motorcycles in every 1,000 households in rural India.Motorcycle penetration in evolved markets in 50 vehicles per 1,000 households.
Bajaj Auto has appointed 135 new dealers in record time since making an announcement on November 24.A typical Bajaj dealership requires at least 1800 sq ft of showroom space and 2200 sq ft of workshop space,and will have about 50 employees.The investment on each dealership will be around.1.5 crore.

The new showrooms will have dedicated zones for the Pulsar and Discover,Sridhar said.Around 20% of the dealership space will be used to showcase technology.

Dealer owners and CEOs will undergo a familiarization and dealership management programme in the first week of March and there will be intense programme for sales and service training, he said.

Most new dealers will be in Maharashtra (around 19),Andhra Pradesh (18) and Tamil Nadu (12).The addition to existing 485 dealers will take Bajajs dealer network beyond 600.

Bajaj Auto reported a 46% growth during April-December by selling 17.97 lakh motorcycles,mostly Pulsar and Discover.The Pune based firm,which exited the 100cc segment two years ago,has set a growth target of 40% to clock four million units this year.

Some experts say that Bajajs margins may come under pressure due to increasing input costs.Margins are expected to be under pressure although the company has increased prices of its products to partially mitigate cost pressures, said India Infoline automobile analyst Jatin Chawla.