[TusharK]

Bajaj Auto Ltd. has become the first 2-wheeler company to cross a market capitalization of Rs. 1 lakh crore. The share price of the company closed at Rs. 3,479 per share on NSE. Its market cap at this price was Rs. 1,00,670.76 crore.



A market capitalization of over Rs. 1 lakh crore has not been achieved by any international 2-wheeler company anywhere in the world. This makes Bajaj the most valuable company in the 2-wheeler segment and also the first 2-wheeler company ever to have reached this milestone.

The 75 year-old 2-wheeler maker offers its products in over 70 countries. It plans to expand into Thailand this year followed by Brazil in the next year. Bajaj is also investing Rs. 650 crore in a fourth plant to manufacture premium motorcycles and electric 2-wheelers at Chakan, Maharashtra.

Bajaj has partnered with KTM AG of Austria, which has helped KTM become the largest manufacturer of premium sports motorcycles. Both companies jointly develop bikes for global markets like the USA and Japan. The company has also forged a strategic alliance with Triumph UK.

[RaghavEvoX]

This is great considering they have just 12% market share in the country. Which means the investors believe in the future potential of the company.
Their export market and also partnerships have contributed to good investor sentiments increasing their share price.

Bajaj shares in the last 1 year. But this is a similar pattern across most companies where the dip is in March (lockdown start) and now on the path to recovery.

[SmartCat]

Reason for this is that all major two wheeler companies are a subsidiary of larger listed parent company. (Eg: Honda motorcyles is a subsidiary of Honda Motors, Kawasaki motorcyles is a subsidiary of Kawasaki Heavy Industries, Suzuki Motorcyles is a subsidiary of Suzuki Motor Corp). Global superbike/ performance bike makers are too small (HOG is one exception).

Originally Posted by RaghavEvoX

Their export market and also partnerships have contributed to good investor sentiments increasing their share price.

Right. Exports constitute 50% of Bajaj Auto's revenues.

[srh]

As a motorcycle manufacturer, Bajaj are pretty ordinary with a bunch of sub par products. All the fat profits are from their 3 wheeler sales and that is what shows in the valuation.

[Nithesh_M]

I've long held belief that Bajaj piling on partners like KTM/Husky/Triumph etc is going to come and bite them in the behind eventually. Kawasaki was also their partner but eventually they found going solo was better for them. Now Kawasaki has the local parts vendors to do their own thing. When other manufacturers get hold of Bajajs vendors they'll split too and that leaves Bajaj all alone like Hero eventually. Their market shares dwindling is a sign of it.

[NiInJa]

Originally Posted by srh

As a motorcycle manufactuter, Bajaj are pretty ordinary with a bunch of sub par products. All the fat profits are from their 3 wheeler sales and that is what shows in the valuation.

3 wheeler sales numbers might be partially true, but not the only reason. Bajaj's export numbers are too high to be compared with any other 2 wheeler manufacturer in India and investors are wise enough to see that
Plus, Bajaj really managed to crack the 150+ cc bikes' category, which is where they get more profits. Whether their products are sub-par or not does not matter as long as the number of units sold and profit earned per unit is good. Personally, I find their products just about the same as leaders like Honda and Hero in terms of quality. None of them are exceptional, both in terms of the product or service.

Originally Posted by Nithesh_M

I've long held belief that Bajaj piling on partners like KTM/Husky/Triumph etc is going to come and bite them in the behind eventually. Their market shares dwindling is a sign of it.

A bit early to say. Bajaj's partnerships with KTM and others appear to be well thought out compared to other automobile partnerships that we have seen in India. What they could not do with the Pulsar brand -go beyond 200 cc bikes- they managed to do it with the KTM. Husqvarna is there to take care of the 'premium' offerings. Now they are working on a twin cylinder engine which looks promising, they might be the only one after RE to bring a two cylinder bike at a relatively affordable price, much earlier than Honda/Suzuki. Their partnership with Triumph is most probably on capturing the cruiser bike market share which is dominated by Royal Enfield. TVS does not have a cruiser bike yet, and Honda just launched a new one two months back.

India's 2 wheeler market share does not really paint a clear picture as a major chunk of 2 wheelers sold are non geared scooters, where Bajaj has no market presence.

[Nithesh_M]

Originally Posted by NiInJa

India's 2 wheeler market share does not really paint a clear picture as a major chunk of 2 wheelers sold are non geared scooters, where Bajaj has no market presence.

For Bajaj India is the biggest market or is it not? Triumph, KTM, Husky all want a local manufacturing hub for exports here and they're gonna use Bajaj till they sort out supply chain for themselves like Kawasaki managed to do now after splitting from Bajaj.

[NiInJa]

Originally Posted by Nithesh_M

For Bajaj India is the biggest market or is it not?

Actually, it is not, if we include scooters ! Rajiv Bajaj himself said that his focus was not market share. I am not aware of how their partnership with KTM works but Kawasaki never brought a direct competitor for Bajaj's products when they parted ways. Its only now that they are testing a basic 150cc bike in India.

In the longer term, we will have to see how partnerships work for Bajaj, but right now they do look promising. International brands trying to sell bikes in India do face cost related issues when going independently. E.g. Harley Davidson tried their hands in India, but eventually had to tie up with Hero as despite selling more bikes than other superbike manufacturer initially, they were not profitable in India. Bajaj and TVS are doing good with their partners KTM and BMW for now.

[srh]

I dare say that the FOB realizations for exports are lower than domestic markets. Bajaj plays majorly in price sensitive low income markets. Not exactly money spinners. Another factor is the shares held in the group holding company which in turn holds shares in Bajaj Finserv.

The reality of their product quality dawns on users a few years after purchase - basically poor longevity. That is the primary reason why they have steadily lost market share in the domestic market.

[avishar]

Originally Posted by Nithesh_M

For Bajaj India is the biggest market or is it not? Triumph, KTM, Husky all want a local manufacturing hub for exports here and they're gonna use Bajaj till they sort out supply chain for themselves like Kawasaki managed to do now after splitting from Bajaj.

No it is not. Infact their domestic sales has stagnated while exports are growing fast. Part of that stagnation is due to Three-Wheeler sales which has not recovered at all, much below pre-covid. So if you take out three-wheelers, two-wheeler sales are maybe flat.

However, with higher realisations from exports, Bajaj's margins are excellent.

[Motard_Blr]

Originally Posted by srh

I dare say that the FOB realizations for exports are lower than domestic markets. Bajaj plays majorly in price sensitive low income markets. Not exactly money spinners. Another factor is the shares held in the group holding company which in turn holds shares in Bajaj Finserv.

The reality of their product quality dawns on users a few years after purchase - basically poor longevity. That is the primary reason why they have steadily lost market share in the domestic market.

Both Bajaj and TVS export to African countries, where they compete with cheaper but inferior quality Chinese bikes. Their success is a testament to the product design and quality.
Before anybody argues about their quality (or lack thereof), so remember that it's horses for courses. These are mostly heavily loaded commuter bikes used mostly on bad roads. The main requirement is reasonable reliability and performance for a good price.

Here's an anecdote from my own observations. I commute by bike everyday and I have a habit of noticing bikes that are in bad shape, especially with smoking 4 stroke engines. Until a few years ago, I used to notice that most of those smoking bikes were low end Bajaj. But these days, I have started to notice a distinct shift towards Honda low end bikes and very few Bajaj bikes. There don't seem to be any more Bajaj bikes that smoke than TVS or Hero. I live in Bangalore where there are plenty of commuter bikes from all makes.

These are just my observations but I do believe that Bajaj quality has improved over time. If their product quality or longevity were really inferior, we should logically expect a gradual drop in sales. But clearly that's not the case. Conversely, the trend for Honda bikes is not encouraging.

[Theyota]

Bajaj owns 48% of KTM AG which owns 100% of Husqvarna motorcycles. KTM has become as big as it has only after it's partnership with Bajaj. So Bajaj is not just a JV partner or a OEM contractor for KTM. Pierer group which owns 52% would have to pay a huge premium if they want to buy back Bajaj. Bajaj has strong market shares in ASEAN and Latin America. Africa is only ~10-12% of its export volume. Over and above all this, Bajaj consistently maintains a very high EBIT (I believe ~20%) which is really high for a manufacturing/auto company. These are the reasons for it's high market valuation.

[dragracer567]

You’ll surprised by the kind of brand recognition that Bajaj has! Dare I say, Bajaj is probably the Indian company with the most brand recognition world-wide (standing toe-to-toe with Tata). For example, in countries like Ethiopia, the word Bajaj is used for all auto-rickshaws (similar to how many people use the name Jeep for all SUVs). And while in countries like Peru, Ecuador, Colombia and Mexico, the three wheelers are called motor taxi, the models used are mostly made by Bajaj. Even for two-wheelers, I was amazed at how popular Bajaj pulsar is in Ecuador, Colombia and in the UAE (here as delivery bikes). I think one market that Bajaj hasn’t been able to capture is the SE Asian market in countries like Vietnam where two-wheelers are really popular, but I’m sure those markets are on the cards as well. Bajaj is indeed a truly global company though their absence in developed markets is still a huge drawback.

[SankalpDesai]

Originally Posted by srh

As a motorcycle manufacturer, Bajaj are pretty ordinary with a bunch of sub par products. All the fat profits are from their 3 wheeler sales and that is what shows in the valuation.

I agree to this 100%. Bajaj products are really sub-par compared with other international manufacturers who offer quality products at not too much of a premium.

This also speaks a lot about how Bajaj has been able to reinvent and keep themselves relevant to consumers around the world, with a product portfolio that helps them hedge the risks across the board.