Former senior principal correspondent at Forbes (India). Since 2008, I have been writing on corporate strategy in the automobiles, clean technology and supply chain space. Before I got onto this assignment, I was part of the team that covered feature articles at The Economic Times. I actually started out as a trainee journalist on the ET desk in 2006. I graduated in commerce from Shri Ram College of Commerce in New Delhi and now live in Mumbai. I love automobiles and spend hours reading up on them and then devote painfully long hours to work on old cars that attract my fancy. Right now I own four cars (my colleagues call them fancy, junk or whatever) and a bicycle which outside my work hours get most of my attention.
Like most battles in his life Rajiv Bajaj has fought this one in his own no-holds barred style. He has been vocal to the point of sounding arrogant, direct and has not hesitated a bit while attacking his opponents – in this case Tata Motors, Maruti Suzuki and TVS Motors. I mean, how many times in corporate India have you seen a media communication like the one reproduced below:
Rajiv Bajaj: “A 700 kg quadricycle's exhaust emission & fuel efficiency will be no different than that of a small car…Who's going to make a 450 kg quadri that can be exported to Europe & will ensure a sustainable world? Bajaj. Who's going to make a 700 kg quadri that cannot be exported to Europe & will continue to choke India? Tata.”
Despite the opposition, it emerges that Bajaj has won the first round of the quadricycle battle. Earlier yesterday, the Government of India approved the quadricycle to ply on Indian roads. In a meeting chaired by Vijay Chhibber, the secretary of Ministry of Road Transport & Highways, it was decided to amend the Central Motor Vehicles Rules (CMVR) to include quadricycle as an additional category vehicle to be manufactured and registered in India. Only as a commercial vehicle though – which means taxi or fleet operations. Nope, it cannot be used as a personal vehicle.
It is no surprise that Bajaj is ecstatic at the decision. “It is a very profitable way to expand the 3 wheeler segment; the RE60 will soon be joined by many more similarly small, light, & low speed vehicles that will make for a cleaner, safer, quieter world. As an anti-car company we're just delighted: 3 cheers for Indian engineering!” says Mr. Bajaj.
What does this mean for Bajaj Auto? Well, the RE60 is ready and Bajaj certainly will have a head start over every other manufacturer in the country. And the first mover advantage counts a lot. There are a few things though that Bajaj wouldn’t have liked in the decision - like a prominent ‘Q’ to be displayed on the quadricycle and its use only as a commercial vehicle. Everything else seems to have gone according to plan.
How big is the opportunity? Bajaj sold 2,26,131 three wheelers in the period April-March 2013.The total size of the passenger three-wheeler market in the country for the same period was 4,41,118 units. On the car side, the taxi segment is currently dominated by the likes of vehicles from Tata Motors, Maruti and Hyundai. That's another opportunity. While Bajaj has said that it is going to sell both three wheelers and quadricycles, at this stage, there are no numbers to go by.
“With an innovative product that creates a new category, quantitative predictions don't work as there's nothing to base them on. Qualitatively this development resets the rules of the game for the global automotive industry. It presents an opportunity for those who can adapt to change & a hurdle for those who can't or won't,” adds Bajaj.
I believe this is still the first round. Now that the quadricycle category is open, manufacturers like Maruti Suzuki will take a shot at it. Tata Motors would need to answer the tough question – can the Nano make a better quadricycle than a passenger car?
Update: I spoke with Puneet Gupta, principal analyst at IHS Automotive, an auto forecasting firm and Puneet isn't very confident that Bajaj is looking at huge volumes to start with. It is not that three wheeler guys will be lining up to replace their vehicle with a quadricycle. "I think Bajaj is looking at policy changes at a state level, as and when new permits are made available, as the potential market. Once that happens then volumes could be quite big. I don't expect Maruti to enter this segment considering their brand position in the market but it definitely makes sense for Tata Motors," says Gupta.