Asia Africa Intelligence Wire, Nov 27, 2003 pNABajaj Auto,...

Asia Africa Intelligence Wire, Nov 27, 2003 pNA
Bajaj Auto, Piaggio in talks for low-cost tech swap.
Full Text: COPYRIGHT 2003 Financial Times Ltd.

(From The Economic Times)

Byline: Nandini Sen Gupta

: Bajaj Auto is in talks with Italian auto major Piaggio for a
strategic tie-up for exchange of low-cost production for technology.
Bajaj Auto CMD Rahul Bajaj is slated to meet Roberto Colaninno, the
Italian financier who bought Piaggio from Deutsche Morgan Grenfell
this September, on November 27 in Pune to hold further talks on the
proposed tie-up.

The tieup plan is part of Bajaj Auto's new strategy to "cooperate"
with overseas autocos particularly in markets which are more
expensive than India. Under this plan, the two and three-wheeler
maker would offer its "low cost production" in exchange
for "specific technology" in the two and three-wheeler business.

Speaking to ET, Rahul Bajaj said he wrote to Mr Colaninno three or
four months ago on the prospects of the tieup, just when the latter
was emerging as a potential buyer of Piaggio. "I wrote to him and
said you have a three-wheeler plant here - come and look at our
costs and yours and look at the numbers we produce and let us see if
we can cooperate." Although he maintained that for now the lunch
with Mr Colaninno is a "courtesy call" and that he can't talk
details "till the other side shows interest," Mr Bajaj said
cooperation with the loss-ridden and beleaguered Italian company
still made sense. "The cost of production in two and three-wheelers
is the lowest in India and China," he said. "So what can the Italian
company offer me? Nothing except some engine and styling technology
for which Italians are well-known. In exchange I can offer low cost
of production," he added.

The move to outsource from low-cost markets like India would make
sense for Piaggio which has been making losses for the past two or
three years. "Clearly they have a cost problem so why not buy what
they want from me which would be cheaper than starting a plant
here," Mr Bajaj added. Currently Piaggio has a facility in Baramati.

Mr Bajaj's meeting with the Piaggio head ties in with the Pune-based
company's aggressive domestic and export targets. The company is
looking to end fiscal '03-04 with 1.2m two-wheelers of which its
export content would be around 5-6%. However, as part of its topline
boosting drive, the company is looking to increase its export
exposure to 12% of its total production of 2m two-wheelers a year in
three years, Mr Bajaj said. And in five years, Bajaj Auto plans to
export 20% of its total production. "Our policy will be to maximise
marketshare in India and abroad for as large a topline as possible
so that we have a healthy and acceptable bottomline," Mr Bajaj said.

Bajaj Auto plans to "assemble" in its export markets mostly because
cost of manufacturing is lower in India and the numbers in overseas
markets will not be big enough to warrant investment in
manufacturing, Mr Bajaj said. The company is opening an office in
Jakarta to oversee its South-East Asian foray while it already runs
an office in Dubai for the Gulf and African markets. It also plans
to open an office in Brazil to cover the Latin American
markets "sometime next year," Mr Bajaj said.