Why Is Bajaj Betting On Cng

Note: AI Generated blog post based on Think School’s Case Study on Why Bajaj is betting on CNG when everyone else is focused on EVs?

CNG Revolution in India: Market Dominance, Government Support, and Infrastructure Opportunities

Introduction

Overview of CNG as an Alternate Fuel

CNG is a promising alternative to petrol and diesel in India due to several factors. Firstly, CNG is an environmentally friendly fuel, as it releases fewer pollutants compared to petrol and diesel. When an IC vehicle runs on petrol, it releases nitrogen oxide and carbon monoxide, which contribute to the greenhouse effect. In contrast, when CNG burns, it mainly releases carbon dioxide and water vapor, with CO2 emissions being 10% lower than diesel engines and 25% lower than petrol engines. Secondly, CNG provides the same mileage or perhaps more as compared to petrol. For example, a Maruti Alto 800 can run for 31.5 km with 1 kg of petrol, while a CNG motorcycle can travel about 101.8 km on 1 kg of CNG, which is an extraordinary mileage. Thirdly, the Indian government has announced that electric vehicles and CNG vehicles will no longer require permits to operate on roads. This move will encourage the use of CNG vehicles, making it easier for customers to buy a CNG bike and for companies to manufacture and sell CNG bikes in India. The world’s first-ever CG terminal will be set up in Bav Nagar, Gujarat, by 2026, further boosting the CNG sector. Lastly, CNG is a cost-effective fuel compared to petrol and diesel. This makes it a more affordable option for vehicle owners, especially in a country like India where fuel prices can significantly impact people’s daily lives. In conclusion, CNG is a promising alternative to petrol and diesel in India due to its environmentally friendly nature, better mileage, government support, and cost-effectiveness. These factors make CNG an attractive option for both vehicle owners and manufacturers in the country.

The Indian Government’s Support for CNG

The Indian government’s bullish stance on CNG has significantly impacted the market in several ways. Firstly, it has led to a rapid increase in the sales of CNG vehicles, with the market share of CNG vehicles increasing from 3.5% of passenger vehicle sales in 2019 to 11% in 2022, and expected to grow to 18% in the next 5 years. This growth can be attributed to the government’s support for CNG, which has helped companies like Bajaj Auto and Maruti Suzuki to become market leaders in the CNG vehicle segment, with a combined market share of 79% and 75% respectively. Secondly, the government’s support for CNG has also led to the development of CNG infrastructure in the country. Although there are significantly fewer CNG stations (6,088) compared to petrol and diesel stations (67,845), the number of CNG stations has been steadily increasing to meet the growing demand for CNG vehicles. Lastly, the government’s push for CNG has had a significant impact on both the three-wheeler and four-wheeler markets. The sales of CNG three-wheelers were 2.41 lakh units in FY23, while the sales of CNG four-wheelers were 3.18 lakh units, which is 32% more. This shows that the CNG car market is now growing faster than the three-wheeler market. In conclusion, the Indian government’s bullish stance on CNG has played a crucial role in the growth of the CNG vehicle market. The government’s support has not only led to the development of CNG infrastructure but has also helped companies like Bajaj Auto and Maruti Suzuki to become market leaders in the CNG vehicle segment. The government’s foresight in promoting CNG has opened up a million-dollar business opportunity for entrepreneurs in the automotive industry.

Bajaj Auto and the CNG Revolution

Bajaj Auto’s Early Adoption of CNG in Three-Wheelers

Bajaj Auto’s early entry into the CNG three-wheeler market gave them a significant advantage in several ways. Firstly, by recognizing the potential of CNG as a fuel source and understanding government policies, Bajaj Auto was able to capitalize on the CNG wave while many other companies ignored it. This foresight allowed them to gain a first-mover advantage in the market. Secondly, Bajaj Auto’s quick shift to producing CNG three-wheelers resulted in the launch of their first CNG three-wheeler in India in just one year (1999). This rapid response allowed them to establish a strong presence in the market before their competitors, such as Mahindra and TVs, entered the CNG market. By the time these competitors launched their CNG vehicles (in 2001 and 2008, respectively), Bajaj Auto had already been in the market for 2 years and 9 years, respectively. Thirdly, this early entry and strong presence in the market gave Bajaj Auto a significant market share. For example, in 2024, 67% of Auto Ras ran on CNG, and Bajaj Auto alone had a market share of 79%. This means that Bajaj Auto sold four times more Autos than their next 10 competitors combined. In FY23, Bajaj Auto sold 1.92 lakh CNG three-wheelers, while their remaining competitors did sales of just 4838 units in total. In conclusion, Bajaj Auto’s early entry into the CNG three-wheeler market provided them with a significant advantage due to their foresight in understanding government policies, their rapid response in shifting to CNG production, and their ability to establish a strong market presence before their competitors. This allowed them to gain a substantial market share and maintain a dominant position in the industry.

Bajaj Auto’s Market Dominance in CNG Three-Wheelers

Bajaj Auto’s 79% market share in CNG three-wheelers can be attributed to several factors. Firstly, their early entry into the market in 1999 gave them a significant advantage over their competitors. By the time Mahindra and TVS entered the CNG market, Bajaj Auto was already 2 years and 9 years into the market, respectively. This first-mover advantage helped them sell four times more Autos than their next 10 competitors combined. Secondly, Bajaj Auto’s understanding of government policies played a crucial role in their success. By capitalizing on the foresight of the government, they won the CNG three-wheeler market in India. This demonstrates the importance of understanding and adapting to government policies in order to gain a competitive edge in the market. Thirdly, Bajaj Auto’s competitive advantage over their competitors was a significant factor in their market share. Their early entry into the market, combined with their understanding of government policies, allowed them to establish a strong foothold in the CNG three-wheeler market. Lastly, Bajaj Auto’s continuous improvement in their products has also contributed to their market share. Over the years, they have consistently worked on improving their products and understanding government policies, which has helped them maintain their market share. In conclusion, Bajaj Auto’s 79% market share in CNG three-wheelers can be attributed to their early entry into the market, understanding of government policies, competitive advantage, and continuous improvement in their products.

Bajaj Auto’s Expansion into CNG Four-Wheelers and Two-Wheelers

Bajaj Auto plans to disrupt the CNG two-wheeler market by capitalizing on their previous success in the CNG three-wheeler market. The company aims to achieve this disruption within the next five years. By understanding government policies and being early adopters of CNG technology, Bajaj Auto managed to gain a significant market share in the CNG three-wheeler market. In 2022, out of the 25 lakh petrol passenger vehicles, 67% of Auto Ras ran on CNG, and Bajaj Auto alone had a market share of 79%. This success can be attributed to their first-mover advantage in the CNG three-wheeler market, launching their first CNG three-wheeler in India in 1999. By the time their competitors, Mahindra and TVs, entered the CNG market, Bajaj Auto was already 2 years and 9 years into the market, respectively. The opportunity presented by Bajaj Auto’s entry into the CNG two-wheeler market is the potential for significant growth and market disruption. The release of the CG motorcycle could disrupt the motorcycle sector of India for three reasons: lower carbon emissions, lower running costs, and higher fuel efficiency. The CG motorcycle’s carbon emissions will be far lesser than its gasoline counterparts, despite having the same top speed. The cost of running the CG motorcycle is about 0.77 rupees per kilometer, compared to around 1.5 to 1.6 rupees per kilometer for petrol motorcycles. Additionally, the CG motorcycle can travel about 101.8 km on 1 kg of CNG, making it a more efficient and environmentally friendly option for consumers. In conclusion, Bajaj Auto’s plan to disrupt the CNG two-wheeler market involves leveraging their previous success in the CNG three-wheeler market, capitalizing on their first-mover advantage, and offering a more efficient and environmentally friendly option for consumers. This presents an opportunity for both Bajaj Auto and potential investors to benefit from the growing CNG wave in India.

Maruti Suzuki and the CNG Car Market

Maruti Suzuki’s Dominance in CNG Four-Wheelers

Maruti Suzuki’s 75% market share in CNG four-wheelers can be attributed to several factors. Firstly, the company’s ability to understand and adapt to government policies has played a crucial role. As mentioned in the context, Bajaj Auto’s success in the CNG three-wheeler market was due to their foresight in recognizing the government’s bullish stance on CNG. Maruti Suzuki seems to have followed a similar approach in the CNG four-wheeler market. Secondly, Maruti Suzuki’s extensive network footprint has given them an advantage over their competitors. The context mentions that Maruti Suzuki has a larger network than other manufacturers, which has likely contributed to their dominance in the CNG four-wheeler market. Thirdly, the company’s focus on launching CNG models has helped them capture a significant portion of the market. The context highlights that while CNG cars were launched 11 years after Bajaj Auto’s CNG three-wheelers, the CNG car market is now growing faster than the three-wheeler market. This indicates that Maruti Suzuki’s early entry into the CNG four-wheeler market has given them a head start over their competitors. Lastly, Maruti Suzuki’s continued investment in CNG technology and their ability to offer a wide range of CNG models have likely contributed to their market share. The context mentions that in 2024, 67% of Auto Ras ran on CNG, and Bajaj Auto alone had a market share of 79%. This suggests that Maruti Suzuki’s focus on CNG technology and their ability to cater to the growing demand for CNG vehicles have played a significant role in their market dominance.

Opportunities in the CNG Car Market

The growing CNG car market in India presents several opportunities for individuals and businesses. Firstly, the retrofitting services market allows car owners to fit CNG cylinders in their petrol cars, providing a cost-effective solution for middle-class families. Secondly, there is a big opportunity to set up CNG stations, as the Indian Ministry of Transport no longer requires permits for electric vehicles and CNG vehicles to operate on roads. This opens up the possibility of starting a fleet with CNG vehicles, which can be beneficial for businesses. Thirdly, the world’s first-ever CG terminal is set to be established in Bav Nagar, Gujarat, by 2026. These terminals store, compress, and distribute only CNG, and their establishment across the country will significantly increase the scope and ease of CNG stations in the next five years. Lastly, the CNG car market is growing faster than the three-wheeler market, presenting opportunities for companies like Maruti Suzuki, Tata Motors, and Bajaj Auto, which have invested heavily in the CNG car market. In conclusion, the growing CNG car market in India presents opportunities for individuals and businesses in the form of retrofitting services, setting up CNG stations, investing in CNG vehicles for commercial purposes, and capitalizing on the increasing demand for CNG cars.

CNG Infrastructure and Opportunities

Lack of CNG Infrastructure in India

India currently has a limited number of CNG fueling stations due to a lack of CNG infrastructure, an aggressive target set by the government to increase the number of stations, and the recent removal of permits for CNG vehicles, which could lead to an increase in demand for CNG. The context provided in [3] highlights that India lacks the CNG infrastructure, which is a primary reason for the limited number of stations. Additionally, in [2], the government’s target to ramp up the number of CNG fueling stations from 688 to 17,700 stations by 2030 indicates that the current number of stations is not sufficient to meet the demand for CNG. Furthermore, the development of CNG infrastructure is still in its early stages, as mentioned in [1], with the world’s first ever CG terminal set to be established in Bav Nagar, Gujarat by 2026. Lastly, the removal of permits for CNG vehicles, as mentioned in [4], could potentially lead to an increase in the demand for CNG vehicles, putting more pressure on the existing CNG infrastructure.

Government Initiatives to Expand CNG Infrastructure

The Indian government is taking several steps to increase the number of CNG fueling stations. Firstly, they have removed the permit requirement for electric vehicles and CNG vehicles, which encourages the use of CNG vehicles and increases the demand for CNG fueling stations. Secondly, the government is constructing the world’s first-ever CG terminal in Bav Nagar, Gujarat, by 2026. This terminal will store, compress, and distribute CNG, and its construction is part of a larger initiative to expand the CNG market in India. As more of these terminals are built across the country, the scope and ease of CNG stations will vastly increase in the next 5 years. Lastly, the government has set an aggressive target to ramp up the number of CNG fueling stations from 688 to 17,700 stations by 2030. This target indicates the government’s commitment to promoting the use of CNG as a cleaner and more affordable alternative to traditional fuels. These steps are aimed at promoting the use of CNG as a cleaner and more affordable alternative to traditional fuels, and they are expected to lead to a significant increase in the number of CNG fueling stations across the country.

Opportunities in CNG Infrastructure Development

The opportunities for individuals and businesses in the development of CNG infrastructure in India include setting up CNG fueling stations, starting a fleet with CNG vehicles, and potentially participating in the construction and operation of CG terminals. These opportunities are on the rise due to the increasing demand for CNG and the government’s aggressive targets for expanding the CNG market in the country. To set up a CNG fueling station, individuals and businesses can visit their State’s website for CNG dealership or land leasing, as mentioned in [1]. This presents a big opportunity due to the overflooding demand for CG stations across the country. The government has set an aggressive target to ramp up the number of CG fueling stations from 688 to 17,700 stations by 2030. Another opportunity, as stated in [2], is starting a fleet with CNG vehicles. In September 2018, the Indian Ministry of Transport announced that electric vehicles and CG vehicles will no longer require permits to operate on roads. This applies to commercial vehicles, including Goods carriers permit and cap permit. Starting a fleet with CNG vehicles can be a good opportunity for initiation in this sector. Lastly, as mentioned in [3], the world’s first-ever CG terminal will be set up in Bav Nagar, Gujarat, by 2026. These terminals store, compress, and distribute only CG. As these terminals are being built across the country, the scope and ease of CNG stations will vastly increase in the next 5 years. This will lead to more opportunities for individuals and businesses in the development of CNG infrastructure. In conclusion, the opportunities for individuals and businesses in the development of CNG infrastructure in India are significant and growing. By taking advantage of these opportunities, individuals and businesses can contribute to the expansion of the CNG market in the country and potentially benefit from the increasing demand for CNG.

Conclusion

The Future of CNG in India

The CNG market in India is expected to evolve rapidly in the coming years, fueled by a combination of factors such as government support, increasing CNG infrastructure, and growing interest from automobile manufacturers. The price-sensitive nature of the Indian market has already contributed to the growth of CNG vehicle sales in recent years. The government’s support for CNG vehicles, as seen in the increasing number of CNG stations across the country, will further contribute to the expansion of the CNG market. Major automobile manufacturers like Maruti Suzuki, Tata Motors, and Bajaj Auto have been investing heavily in the CNG segment, with Maruti Suzuki holding a market share of 79% in the CNG car segment. Bajaj Auto has also announced plans to launch a CNG-powered motorcycle in the near future. This growing interest from automobile manufacturers will provide consumers with more options to choose from, further driving the growth of the CNG market in India. As the infrastructure for CNG vehicles improves, with the establishment of CNG terminals in various locations, we can expect to see a wider variety of CNG models being introduced by automakers. This will provide consumers with more options to choose from, further solidifying the position of CNG as a viable and cost-effective alternative to conventional fuels in the Indian market. In conclusion, the CNG market in India is expected to continue its rapid growth in the coming years, fueled by government support, increasing CNG infrastructure, and growing interest from automobile manufacturers. This growth will likely lead to a wider range of CNG vehicle options for consumers, further solidifying the position of CNG as a viable and cost-effective alternative to conventional fuels in the Indian market.