Bajaj Auto faces rough ride in India car market

Abhijit is fiercely proud of his Kawasaki Bajaj motorbike and considers himself a company loyalist.

"Motorbikes are the best for urban travel. They're economical and easy to park," the Mumbai sales executive in his 30s told AFP.

But while Abhijit, who uses only one name, wants to upgrade to four wheels, he is not yet sure whether he will stay true to the Bajaj brand, even though the company has announced that it is looking to get into the small car market.

"You know what you're getting with bikes and scooters," he explained. "A car from Bajaj? I'm not too sure."

Bajaj is India's second-largest manufacturer of two- and three-wheelers, and its name is synonymous with auto-rickshaws in the country, the world's largest market for such vehicles.

But the attitudes of customers like Abhijit - one of the millions of Indians that the automaker has helped make more mobile - could be a stumbling block for the firm when it comes to cars, analysts say.

The Indian car market, where nearly two million new cars were sold last year, is increasingly crowded and cut-throat.

"Bajaj has the right DNA to make a car but not the experience," said Hormazd Sorabjee, editor of Autocar India magazine.

"It won't be easy. It will be a steep learning curve," he told AFP.

Bajaj Auto has tied up with French car giant Renault to produce, market and sell what it says will be a "pathbreaking", ultra low-cost, fuel-efficient minicar. The vehicle is slated to be launched next year.

The move makes strategic sense with small cars increasing their presence on India's roads ever since the launch of the Maruti 800 in 1983 - the product of a partnership between Maruti Udyog and the Suzuki Motor Corp.

Nowadays, its successor the Maruti Suzuki Alto is the country's most popular small car, with Hyundai's Santro also a firm favourite among urban drivers.

Car penetration is low, with just 13 out of every 1,000 Indians owning one. But the market is the second-fastest-growing in the world, with sales forecast to rise by at least 25 percent in the current financial year, according to the Society of Indian Automobile Manufacturers trade body.

Two-wheelers remain India's favourite form of transport because of their low cost and easy maintenance, with motorbikes now accounting for 80 percent of the market, a turnaround from just a few years ago when cheaper, smaller scooters dominated.

Almost all of Bajaj's two-wheeler sales are now motorbikes, and Mahantesh Sabarad, an auto analyst at Mumbai-based Fortune Equity Brokers, said that the firm's focus on more powerful machines has paid off.

"The company has seen a rise in profits over the past decade even as scooter sales and market share dropped," he added.

But while the business, based in Pune, 170 kilometres (110 miles) southeast of Mumbai, has 50 years of manufacturing experience, a Bajaj car may be a harder sell.

Even Tata Motors - one of India's leading vehicle makers - has found the going tough.

It has tried to capitalise on the aspirational value of cars to Indians - and their traditional eye for a bargain - with the Nano, launched in mid-2009. Selling from just 100,000 rupees (2,500 dollars), the no-frills vehicle is the world's cheapest.

Nonetheless in November last year Tata said sales had slumped to just 509 units, forcing it to offer a string of after-sales perks to tempt new buyers. Sales have rallied but still just over 83,000 have been sold overall - well below initial expectations.

Rajiv Bajaj has said his company's aim was to deliver a car with "mileage of 30 kilometres to a litre of fuel (71 miles to the gallon)". The company has refused to divulge any more details on the new car or its business strategy.

For his part, Sabarad said that whatever form the car takes, it will need to be a little more luxurious than the Nano.

"The Tata Nano experience shows that Indians do not necessarily like a bare-boned car. They like their car to be small but packaged with all the comforts of a full-sized one," he added.

sal/phz/pmc/slb

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