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The Rediff Business Interview / Rahul Bajaj

'If one has to be internationally competitive, one has to manage on merits'

Charges are often levelled against Bajaj Auto for using the same old technology you used in the 1960s, for lack of innovation and for making vehicles that contribute hugely to our pollution problems. How do you react to that?

Yes, people say there is not much innovation, there is obsolete, old technology, pollution etc. In some ways, to be fair, each of these things has some substance. There is no smoke without fire. In some ways, some of these things were valid five years ago.

The vehicles we make today, two-stroke or four-stroke, are as environment friendly as any in the world. No one knows that.

What they know is that Delhi is dead. I can't breathe in Delhi when I go there. And 40 per cent of the pollution is vehicular. Of that, a significant portion is two or three-wheelers. So what does that mean? Bajaj. So they say, you are creating pollution. What do you do? The thing to do then is to reduce the number of two-wheelers, reduce the age of those vehicles, and clean up the new two-wheelers.

In April 2000, the norms for two-wheeler emissions are going to be the toughest in the world, even more than the cars. If I don't meet those norms, I can't ply. And I am meeting those [norms].

But the culture here is one of corruption. One can purchase a vehicle pollution certificate for Rs 200. More than that the number of vehicles should be reduced and average age of vehicles should be reduced. And (the governement should) introduce environment-friendly public transportation in the cities.

How do you perceive your competition? Once upon a time, Bajaj had the monopoly in the two and three-wheeler market, now you have lost the market share to the foreign companies that came in. How are you tackling that?

Yes, we have lost some market share in the last two years. When Honda, Yamaha, Suzuki and Vespa, all the four being two-wheeler manufacturers of 200 cc machines, came into the country in 1986, [we] had a market share of 37 per cent. Today it is still 37 per cent. What happened in between, we ended up with 48 per cent after the foreign manufacturers came in, then we came down to 37 per cent due to various factors. So we went up and we went down.

What is important is that these are the best in the world, their technology comes from home. We lost market share in the last two-three years because our new models took time to come out.

We are persona non grata, very rightly so, for all four of them. We are a threat to them not only in India where we are the leaders, but the world over. They are not going to give us any technology. They are not going to touch us with a 10-foot pole and very correctly so. We have no foreign equity in Bajaj Auto except the GDR holders. No company has foreign equity in ours. All competition of mine till now has had joint ventures: Escort-Yamaha, TVS-Suzuki, LML-Vespa, Hero-Honda.

How does this translate into the bottomline?

1997-1998 was the first barrier for Bajaj Auto when sales went down from 1.42 million vehicles to 1.32 million units due to a demand problem or losing market share problem. 1998-99 continues to be another bad year and we think we are going to close the year with a sale nowhere near the 1.42 million mark of '96-97. I hope we will cross the 1.32 million figure of last year.

October, November, December '98 were disastrous because the market was down. [But] my '98-'99 after-tax profit may be lower than that of last year's but it will still be in the top 10 private sector companies in India, if not in the top five or six. My after-tax profit will be more than my two and three-wheeler competitors put together. So nobody's crying. And I am not shedding any tears.

Does Bajaj Auto has any plans of diversifying into other areas?

No, I don't want to diversify. As far as Bajaj Auto is concerned, I want to stick to my core competence and I want to become truly multinational.

But the world is moving away from manufacturing to the services sector. Wouldn't you like to move toward that sector?

That is a completely wrong connotation and when the top people in the world including the McKinseys say that, I think we have to see that they are referring to weightage. Even in India, service sector is 40 per cent but there was no such sector before. Weightage is gradually increasing but the fact remains that if there is no manufacturing, how will you live, travel and eat?

As far as we are concerned, for the next 400 years, you cannot do without movement, mobility. People will need to move from one place to another. That means you need cars, planes, two wheelers.

My business is to provide economical and convenient mode of transport. If that means four-wheelers, I will make four-wheelers; if that means eight-wheelers, I will make eight-wheelers. I am in the business of providing transport and in India, two and three-wheelers will remain a mode of transport for at least 10 to 20 years, if not longer. It is in this area that we aim to become a truly multinational company.

One last question. Have you thought about retirement and succession?

I became 60 last June. Normally you should retire at 60. So I have stopped looking after the day-to-day work of Bajaj Auto but as I still remain chairman and MD, I am still responsible for the progress of the company.

My cousin Madhur Bajaj is president of BAL and my two sons Rajiv and Sanjiv, who joined BAL in August 97 are vice-president, products, and general manager, corporate finance, respectively.

As of now, it is very difficult to be very specific about succession.

In India one has to be aware of the fact that this is a public limited company with 30,000 shareholders and if one has to be internationally competitive, one has to manage on merits.

On the other hand, our family has a controlling interest and the Indian family goes by age and generation.

According to me, the best guy to succeed me as the CEO, five years from now, is Rajiv. He is the one who is doing very well [with] new product development, production, quality and marketing.

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