Corporate Jan 4, 2012
Will Bajaj Auto's ultra-low-cost four wheeler, RE60, become a Nano (the small car launched by Tata Motors) killer?
Rajiv Bajaj, managing director of Bajaj Auto, would probably cringe at that question. "As a marketing position, we are an anti-car company," he told a press conference in New Delhi on Monday, a fews days before the Auto Expo. "This vehicle was born out of the costs and skills of a two-wheeler market. There must be a starting point for a strategy, which, in our case, was a brand."
The RE60 represents the culmination of a four-year project to introduce an ultra-low-cost four-wheel vehicle for Bajaj Auto. To be sure, the company, when it started on the project in 2007, did indeed set out to create a Nano rival in collaboration with partner Renault Nissan.
However, the concept was dropped because "it did not make sense." The better option was to go in for a "four-wheeler", said Bajaj, adding that the RE60 was eventually completely developed in-house.
Just as well to call it a 'four-wheeler" than a Nano killer. After all, there's not much left to kill in the Nano; poor market positioning and distribution network has left the car, once touted as the world's cheapest, struggling to find buyers in the Indian market. Plus, in terms of looks, the RE60 is a bit gawky and doesn't quite look like a car either.
Nevertheless, it's highly likely that comparisons will be made, at least in terms of pricing.
According to a Business Line report, the RE60, which weighs barely 400 kilograms, is expected to cost around Rs 1.8 lakh and will be produced in Aurangabad, Bajaj Auto's production base for its three-wheeler range. Fitted with a 200-cc rear engine, it will have petrol and CNG/LPG fuel options.
During the unveiling of the model, the company outlined some parts of its strategy for selling the RE60.
One, in India, the company is eyeing the market of five million three-wheelers in India, nor ordinary individuals looking to buy their first car, as its target audience. Since Bajaj Auto is the dominant producer of three-wheelers in the country, that means it's not trying to grab market share from other companies; instead, it will attempt to convert its own customers to opt for the RE60. "I feel that in the next 10 years, that entire fleet can be replaced with something like this," said Bajaj.
Three-wheeler commuters are unlikely to complain - auto rickshaws and good-carrying three-wheelers have always been perceived to be somewhat of a safety hazard because of their instability (three wheels) and lack of a proper roof or side doors (in the case of auto rickshaws in particular).
According to a Business Today report, the company already has an ally in Delhi's Chief Minister, Sheila Dixit, who apparently is quite eager to get rid of these "eyesores" (autorickshaws) from the city. "Do not be surprised if a diktat to replace all three-wheelers with products like the RE60 happens within a year or so," the report noted.
Two, if priced right, the environmental friendliness and high fuel efficiency could add to the allure of the RE60 within its target three-wheeler market. According to media reports, the vehicle's fuel efficiency is said to be more 35 kilometres per litre. In contrast, the Tata Nano offers about 25 kilometres per litre.
In addition, the RE60 emits just 60 grams of carbon dioxide per kilometre- the lowest for a small car anywhere in the world, according to experts, which should further bolster the appeal of the vehicle among state governments seeking to cut down carbon emissions in urban centres. It is being touted as a green replacement for autorickshaws.
Three, Bajaj Auto plans to aggressively market the RE60 in global markets. At the press conference, Bajaj said that Sri Lanka could, quite possibly, be the first market where the RE60 is launched, even ahead of India. In Sri Lanka, however, the target could be ordinary individuals looking for a cheap self-owned vehicle to commute. Bajaj Auto already exports 10,000 three-wheelers every month to Sri Lanka and 90 percent of them are used for personal travel, the company said.
Africa is another market that the company is keen to tap, especially since public transport in the continent is extremely poor. This strategy leverages on the company's capacity to sell in overseas markets. "We make about 5,20,000 three-wheelers a year, of which only 2,00,000 are sold in India; the rest are exported," said Bajaj.
So will the RE60 become the success that the Tata Nano hoped for but has not yet achieved? Only time will tell. But if all goes according to plan (and government regulations permit), we might soon be saying goodbye to our three-wheeler rickshaws.
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