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BW Businessworld

Extreme Frugality

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When Carlon Ghosn, the CEO of the Renault Nissan Alliance, first met Bajaj in 2006 he was so impressed with the three- wheeler maker that he coined the word 'frugal' engineering as a compliment to Indian ingenuity. Although Renault Nissan's and Bajaj's technical alliance fell apart in 2009, Bajaj Auto MD Rajeev Bajaj went ahead and Indianised the vehicle. The result was RE60, a 15-bhp 200-cc four wheeler. Rajeev was careful with his words while referring to the vehicle. "We are an anti car company and the world does not need any new car company," says Rajeev Bajaj.

The vehicle has a DTSi four-valve rear engine that can speed up to 70 km per hour and give 35 kilometres to the litre. It is even supposed to be eco-friendly generating only 60 gms per kilogram of carbon dioxide when compared to 100 gms per kg CO2 emitted by other cars. The marketing tag line for this car — "over 100,000 Indians die a premature death because of air pollution. Vehicles account for 70 per cent of the pollution in cities." — is built on its eco friendliness.

The weight of the car is apparently only 400 kg. "The vehicle will target three-wheeler users and yet it will not cannibalize our three-wheeler market," says Bajaj. The company sells 200,000 three-wheelers in India and 300,000 globally. The company adds that it will produce the vehicle in the Aurangabad plant where the monthly capacity is 45,000 vehicles and will be built along with three-wheelers. There are plans to export the vehicle to Sri Lanka first and then Africa. However, the company will bring this vehicle into the market in the second half of this year.

"They make good three-wheelers at a low cost. This is what we need to learn from," Carlos Ghosn had told BW. Staying true to the top man's statement, Bajaj managed to pull something out of its three-wheeler DNA. However, this vehicle will be made available to Renault Nissan to be marketed under their names if they want to. That said sources say that Renault Nissan are already out of this project. Apparently only one Renault engineer worked on the project for three years. Differences over the design and safety element turned the friendship sour.

Then again Bajaj has showcased something that could change the market dynamics locally. Currently there is no four-wheeler below the Rs 1,30,000 range and the intention of the company is to place the product at that price. "The pricing decision will be made when we have a product ready for production," says Rajeev Bajaj. He adds that on any such product the EBITA earning should be close to 20 per cent.

The Tata Nano, which is a 600cc engine, is the closest competition to the vehicle selling over 80,000 vehicles. But Bajaj thinks that great truck makers cannot make great small car makers. "We are like Apple Corp, we want to make niche successful vehicles," says Rajeev Bajaj. The RE is a thee wheeler from the Bajaj stable and the new four-wheeler will be sold through the existing commercial vehicle network of 162 sales points. The market for this vehicle will be more in smaller towns and the strategy is clear, to create new buyers. The company also showcased a CNG version of the vehicle.

If Steve Jobs is the inspiration behind the RE60, hopefully the inspiration will not eat into the core of the company's business, which is bikes and three wheelers. After all, the Rs 17,386-crore Bajaj Auto controls 60 per cent of the three-wheeler market.