Bajaj Auto: What is the value proposition of a CNG bike vs EV & ICE models? Bajaj Auto’s Rakesh Sharma answers

Rakesh Sharma, ED, Bajaj Auto, explains the logic behind launching a CNG motorcycle. He says the company expects this to be a pivotal point in the development of the two-wheeler industry in the country. And if we have to take the government at face value, which there is no reason to disbelieve, the CNG network is going to grow even further and faster, every month 100 new pumps are being added. That means CNG will have ubiquitous availability. At this point, their estimate is only 60%, but it will go to 80%.

Let us begin with this CNG bike launch. What is the value proposition of this model versus the EV and the ICE models?
Rakesh Sharma: Well, for the full lowdown you will have to come to Pune on 5th; by 2 pm we are unveiling the new bike. For now, suffice to say that it is the outcome of a very intense exercise over the last two to three years. We will be showcasing through this, the power of innovation at Bajaj Auto. It addresses a very large market size. Almost 70% of the one million per month market of motorcycles has some level of sensitivity to fuel economy. Our whole effort was that we have to make a significant difference to it. Otherwise, making an incremental difference, which we have been trying, gets us marginal benefits. People do not shift for incremental differences and that is where our experience with CNG over the last 20 years through the three-wheeler came into play. We were the first to launch the RE, the three-wheeler based on the CNG fuel. So that cuts the fuel expenses which are amongst the top three or four expenses of a household by almost 50%; that is a significant saving.

A very average customer who is earning Rs 30,000 to Rs 40,000 per month can expect to save depending on how much they tried about Rs 1,500 per month. Secondly, with all the thrust of the government and also with the companies on decarbonization, CNG, while still a carbon-based fuel, has far less carbon content, and to that extent, it is much more beneficial from an environmental point of view than let us say a diesel or petrol, particularly in the carbon-based emissions. So, there is a significant reduction in that. Thirdly, we found that as we were doing this in parallel, there was a huge and brilliant effort by the Government of India, Ministry of Petroleum and Natural Gas to drive the CNG network, which has been very successful. And in fact, our three-wheeler business has ridden on that. Today, 70% almost of the districts of India are covered by a CNG network. All the gas distribution companies are looking for increased throughput so that there is a good return on their capex and that is where there is a coincidental, but a very, I mean, providential, but a very good alignment with the government thrust. As we were doing this, we thought, let us bring to bear all our understanding in terms of what is the comfort requirement, what is the ergonomics, what is the sort of the way the people ride and the passengers ride, and let us bring all this together into this new bike and that is all got packaged along with the 50% reduction in fuel expenditures.

A few years back, when one of the passenger car manufacturers for the first time went ahead and launched CNG, a large section of the passenger vehicle market shifted towards CNG, be it for commercial terms, taxi usage, and many others. Could this also be a very large shift to the extent that some of your products could get cannibalized? Is it still making commercial sense on a larger scheme of things on the volumes and profitability front for you?
Rakesh Sharma: Yes, you are right, our expectation or anticipation is that this could be a pivotal point in the development of the two-wheeler industry in the country. And if we have to take the programmes of the government at their face value, which I have no reason to disbelieve, which is that the network is going to grow even further and faster, every month 100 new pumps are being added, so that means CNG will have ubiquitous availability. At this point, our estimate is only 60%, but it will go to 80%. So, you can see that 70% of the one million people are at some level, fuel-efficiency sensitive and almost 70% of the market of India is going to be covered. And it could unleash this transition. But having said that, the pivotal point in this is a change in customer behaviour, that is what we have to see. Because now the customer has to go to a different petrol pump, the customer has to get used to a different kind of fuel and filling of the fuel, etc. So, there is a lot of response that the distribution companies also have to give as this market develops.

So, that is the one piece that we are finally waiting for. But I do not doubt that over some time, it is only the slope that one is concerned about, but over some time there will be a significant shift. Because it is Rs 1,500 per month for a person in that category. We have seen this happen in three-wheelers. For long, we hammered our head against the diesel three-wheelers, where we had an adverse competitive ratio, but we could not make a breakthrough, we would not get dealerships in Bihar.

But the moment the CNG pump arrived over there and people saw that Bajaj CNG was better, we were flooded with inquiries for dealership, because people were shifting from diesel to CNG. After all, they were saving Rs 1,000-2,000 per month. Of course, that is the commercial category. We have seen that happen in electric vehicles also, where there are far more anxieties – about charging, range, battery etc. But the saving of the day is so powerful a magnet that people have shifted from ICE vehicles to electric, despite all these question marks about where will I charge it? What will happen to the battery? Is it safe and all that?

So, it is a very powerful proposition, combined with the fact that it is not going to be an apologetic vehicle, it is going to be a vehicle whose style and design are going to stand on its own and it will also have all the learnings of the last decade on what a person in a small town and a person of that riding habit needs to make the ride comfortable. So, I think it can be a pivotal moment, but we have to wait for how the customers respond to this behavioural change in terms of visiting different petrol pumps and the pattern of refuelling and all that.

What about the next five years? Do you have export plans for the CNG bike?
Rakesh Sharma: India is unique vis-s-vis the penetration of CNG. It is without parallel. There are a few countries like Bangladesh, Egypt and even Tanzania where you get excellent CNG network, but not outside Dar es Salaam. Then there is Peru, a little bit in Argentina also. So, there are about half a dozen countries which could be candidates in the immediate. Beyond that, Nigeria has started with CNG, but we will have to see how their CNG distribution plans roll out over the next five years. At this point of time, about six countries can receive the product.

Anything on the CNG motorcycle that you want to divulge in terms of the name? Rumour has it that it is going to be called the Bruzer. Is that true?
Rakesh Sharma: Well, it is difficult for me to say anything on that, because it will take the thunder away on the day of the launch. But Bruzer was the code name and that much I can tell you that it is not going to be Bruzer. The brand name is something else. It is an evocative brand name. And it is going to be something else. It is a bike, which has got a very stand-on style. And then it has got biofuel capability in the sense that it has got both CNG and petrol so that it brings in a large amount of reassurance.

Secondly, it also increases its range. With a full tank of CNG and a full tank of petrol, you can ride a very long distance. It is taking care of a lot of ergonomic and comfort issues. We will start with one or two products, but depending on how this thing is received, the pace at which it is being received, we intend to widen the portfolio and we are also delighted that Mr Gadkari is going to be there at the launch, because he has been a champion for alternate fuels and decarbonisation and sensitivity to the environment and we are delighted that he will be there at the time of the reveal. So that is all what I can say right now without taking the thunder away.