The recent launch of
Bajaj RE60, the four wheeler from Bajaj Auto, points in one direction - in India , the low cost car segment still seems
lucrative. It would have been much easier to accept that low cost cars
are not for India after the much hyped Tata Nano failed to perform. However, the fact
that nearly 40-45% of the Indian market falls in the below INR 4 lakh car
segment is too big to ignore. So the big question is – How should one target
this segment with an entry level car?
When Ratan Tata shared
his vision of a small affordable family car and delivered it, the marketing
point was simply the Rs. 100000 price point. While it may seem a great way to
target customers by opting for a penetration pricing and trying to convert the
two-wheeler consumer to four wheeler- controversy over the original plant site
in Singur, coupled with general perception that a cheap car won’t be able to
last on Indian markets ensured that that Nano underperformed from its
expectations. To make matters worse, rising input costs ensured that the
Nano now retails at more than INR 1.5 lacs. Bajaj has been careful in avoiding
the low price strategy by adopting an initial price tag of INR 2 lacs- making
it a competitor to Maruti variants like Alto rather than the two-wheeler
segment- clearly, a smart move !
The Bajaj RE60 was
originally intended to be developed as a low cost car in collaboration with
Renault-Nissan as a challenger to Nano. However Bajaj fell out with Nissan
during the course of time and finally had to deliver the car on its own.
The new car RE60 was developed indigenously in-house by Bajaj CTO Mr. A.
Joseph, who heads the R&D division, and his team.
Furthermore, there is
also a booming market for cars in this segment in the African and Latin
American countries- which makes the pie look extremely attractive. However,
given the less than average performance of Nano, a lot remains to be seen
whether Bajaj can deliver. Bajaj has an advantage as it can use its existing
2-wheeler and 3-wheeler distribution chain in Africa to market its car, an advantage that Tata Nano
lacked. With the launch of RE60, Bajaj will increasingly intend to move up the
value chain by offering more products depending on the success of this variant-
let’s hope it succeeds and consumers get more choices in this price segment.
Food for thought: Do you feel Bajaj should have continued to
focus on its core competency and avoided entering the four-wheeler segment?
