Leadership: Rajiv Bajaj’s Electric Vehicle Strategy

This month the BQ Leadership interview series featured Rajiv Bajaj, managing director of Bajaj Auto. Bajaj spoke abut his leadership style (more paranoia, less courage), modular manufacturing, the Qute failure, the return of Chetak and EV transformation..Read: Rajiv Bajaj On EVs, Chetak, Tesla And Bajaj Auto 3.0.This is a lightly edited transcript of the interview portion in which he discusses the electrification of automobiles, Tesla’s success and Bajaj’s strategy..Menaka Doshi: The shift to electric vehicles is going to be one of the biggest metamorphoses or transformations this industry has seen — it’s going to impact everything from technology to manufacturing to the way you sell and communicate to consumers. At this stage the Chetak seems to be in very infant stages of that. The Chetak is a bet on the future, and it still looks like a very small bet?Rajiv Bajaj: I wouldn’t say so because the Chetak is certainly our first move in that direction. And like the Pulsar 20 years ago, I said then that it will start slow but it will open up Bajaj 2.0, which it did overtime, I think Bajaj 3.0 can ride on the back of Chetak.Quantitatively we are again making just a few hundred a month but unlike the case of Qute that is not for want of demand. The marketing guys want 5,000 among them yesterday, but as you said the supply chain is very disrupted, particularly with the semiconductors and stuff, it will take us a little while to get there and then we can roll it out across the top 30 cities in the country.Qualitatively we are in a very good space because I have seen many reports of comparing the Chetak with other similar rivals in the marketplace and suggesting that it is head and shoulders above everything else. So, I think that we’ve done the right thing by taking that small step forward for Chetak, which is a big step for a big lead for Bajaj Auto.Having said that, yes, the next one year we will make every effort that we can to scale this up and from there on we have to then broaden the portfolio as we did with the Pulsar and bring in more products and more brands into the EV space.So, I don’t see us at any disadvantage to anyone else because somebody is making 500 a month, somebody is making 1,500 a month, everybody’s at the same point of the learning curve by and large. So, I think that we are neither too early, nor too late..Menaka Doshi: Do you think this industry from here on is going to demand a very different style of leadership or strategy from companies like yours?Rajiv Bajaj: I think we will see some big changes associated with this transformation.Number one, you’re going to have a whole new set of competitors as an organisation, and you’re going to have competitors out there who have access to lots of cheap money and who burn it on a daily basis. So how does an incumbent cope with that pressure? Each company has to find its answers for that.Number two, as we did with the shift in technology from scooters to motorcycles, once again, we will have to ultimately develop and internalise our own technology. I mean we can’t be buying the entire EV powertrain from suppliers and then hoping to make money selling it. This black box approach is not going to work—that means Bajaj has to develop as much as it did with the Pulsar it has to develop its own technology with the Chetak. Implement it—both in terms of product and process in itself as also in its supply chain and implement it to quality and cost. I mean it took us many years to get the cost structure of the motorcycle right. It’s no secret that we lost money for the first several years when we collaborated with Kawasaki starting mid-80s. So, getting the cost structure right and getting these skill sets right—the two assets I talked about earlier, is going to be a second big challenge for the industry.The third, what I anticipate, is this — that every time there’s a shift in core technology, it is invariably associated with a shift in what people call the form factor, the styling or the design of the vehicle. Think of when the Premier Padmini and the Hindustan Ambassador gave way to the Maruti 800. It was a very different form factor. The Chetak gave way to a Splendor, a very different form factor. The Splendor gave it to an Activa—with a very different form factor. So, with the electric vehicle should come very different form factors. It will still ride on two wheels because it’s a two-wheeler but it will be a very different two wheeler..And, we are back to our discussion on being counter-intuitive — because 99 out of 100 marketing people in the country will reject that form factor because they will say it doesn’t exist out there, who is going to buy it?.Again, you have to have the conviction that you are standing on the right principles and that this is the differentiation which is going to make the impact. So, I think these are the kinds of issues that existing companies will have to deal with..Menaka Doshi: What do you think of what Tesla has achieved?Rajiv Bajaj: I think Tesla has done remarkably well and they are not making small numbers anymore. I mean, if what I read is correct that they made a quarter of a million vehicles almost in the last quarter — that’s a rate of a million vehicles a year. A million vehicles a year at that price point, pushed them right up there with the Germans and the Lexus and all the rest of it. So, it’s outstanding. I don’t know how profitable or otherwise they are.Menaka Doshi: Last year seems to have been a good one for them.Rajiv Bajaj: That means they’ve got the secret sauce right.Menaka Doshi: What do you think that company has done correctly?Rajiv Bajaj: I think first and foremost, it is this. If you go back to a movie called Sarkar —when the bad guys go to the Swami and say to him that we want to eliminate the Sarkar, Swami gives a wonderful piece of marketing advice..He says, “Sarkar ko maarne se pehele, Sarkar ki soch ko maarna jaroori hai”..Because if you destroy the aura around the person, then people don’t care about the person.What is the brand? The Soch, the story is the brand, and the human body is the product. Why I say this is because, why is it that the Nissan Leaf or the Toyota Prius or the Honda whatever or the Chevy Volt do not fundamentally have the same aura or the same charm as a Tesla?When you hear the name Tesla you know that it occupies the singular position of an electric car. Every Tesla on the road is electric. Can you imagine a hybrid Tesla that also has a petrol and diesel engine in it? I mean it’s sacrilege, it’s a sin almost, right? So, the thing is that consumers are, first and foremost, reacting and responding to the brand position.What a conviction, what a company, what a guy, they are willing to bet everything on being electric and of course they’ve made a fabulous product. That’s always important but engineers rarely fail a company. It’s the business, strategic and the marketing guys that fail the company most of the times..So, I think that the very important thing for all of us is going to be not how we make a new form factor and a new battery and new swapping or new sharing, but how do we first create a new perception. Because that is what consumers are looking for, that is what is most charming to them..I don’t think the best way is to do a Nissan Leaf, because in the end of the day a Nissan Leaf is just another Nissan. The same car presented differently. Think of BMW bringing the Mini back. They didn’t call it a BMW Mini. They gave it its own identity and its own personality. I think that is the piece that you have to figure out right and that is important because then you’re dealing with perhaps a new brand, you have to have an organisation that is dedicated to that brand, you have to develop products that reflect or mirror what that brand stands for, you have to develop a distribution network where consumers can come in and experience that brand in terms of retail experience. Everything will be driven by that. So, I think that is what they have got right in my view..Menaka Doshi: That’s what you’re going to do for Chetak or Chetak is just about dipping your toes in the water right now?Rajiv Bajaj: No, we have to do what we have thought of doing which is not very dissimilar. We have brought back a brand which has been out of the market 15 years. We have stayed true to that brand. It’s an all-metal scooter because that’s what Chetak should be. It’s a so called all-classic or modern retro because that’s what it should be..Menaka Doshi: Will young audiences connect with it? Chetak is from our parents’ generation.Rajiv Bajaj: With this generation you’d be surprised. If you ask people you’d be surprised, whether it’s a Mini or whether it’s a Chetak it is not about what is slick or what is classic because it is about the charm of having your own position and your own identity. Now obviously no brand has 90% market share, so that’s not going to happen, but from whatever I have seen, whenever we have researched the Chetak the appeal is very broad. It’s quite agnostic to age, gender, and all of that.That’s why we have built an exclusive organisation that deals with the Chetak — where we have taken the longer route of not putting the Chetak into the existing 600 Bajaj dealerships, but we have put up specific Chetak dealerships. We call them the Chetak Experience Centre. It will be a slow build up as we did with KTM because we will be building from scratch, the new brand, the new organisation and the new distribution. I think that is what works in the long term and that seems to have worked for Tesla from whatever I can observe from the outside.Menaka Doshi: You’d have to destroy something to build something new, right? 20 years down the line what is your vision of what you think Bajaj might be?Rajiv Bajaj: I think I like very much the definition of the job of a CEO that Al Ries wrote about in ‘The Origin of Brands’, where he said that the job of the CEO is to find the future in the current activities.So, I’m not going to destroy any of the current activities of Bajaj. I have to simply evolve and adapt them to the way the market is moving or our anticipation of where the market is headed..In the past the Chetak gave way to the Pulsar. Now, maybe in the future, a Pulsar will give way to a Chetak again. Maybe that is the circle of life that tells us how to adapt..Menaka Doshi: Is that approach too incremental to enter a transformational space?Rajiv Bajaj: No, I don’t think so. On the one hand we have the existing Bajaj Auto with about a dozen motorcycle brands and about three brands in the three-wheeler quadricycle space. We run a very efficient and a very profitable organisation, incidentally, the most valuable in the world in its space so we naturally have got to keep this going.We have to do our best for this because nobody knows what the future will be..I mean, there are people who will tell you everything will be electric in five years and there are people who will tell you it’s not going to happen for 50 years. I will fall back again on the same principle of modularity and say to myself, that we will keep ourselves ready to be able to switch from one to the other in whatever mix as required..While we have the existing show going because we can’t take the foot off that pedal, we have to at the same time build the future with Chetak and maybe with other electric brands..It’s no secret we have said that the Chetak platform will be used to build Husqvarna scooters, it will be used to build KTM scooters and, in fact we are also working with this Bangalore based company called Yulu, that is today a market leader in micro mobility. They are today sourcing out of China I believe, but tomorrow they will also source out of Bajaj their requirement of product — which will again come from the Chetak platform. So, I think we are doing quite a lot, whether it’s enough in time we’ll know..To read the first part of this transcript on Rajiv Bajaj’s successes and failures click here.Watch the full interview here..Tesla’s Blowout Deliveries Lift Shares Even as Smaller Peers Lag

Leadership: Rajiv Bajaj’s Electric Vehicle Strategy

Bajaj Auto’s managing director talks about three big changes in the EV age.

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