Seeking to disrupt the stagnant entry-level motorcycle segment in India, Bajaj Auto Ltd on Friday launched the world's first CNG motorcycle, the Freedom, priced between ₹95,000 and ₹1,10,000. The company also urged the government to reduce the Goods and Services Tax (GST) on two-wheelers from 28% to 12%.

A 125cc petrol engine powers the Freedom and carries a 2kg CNG tank and a 2-litre petrol tank but can run entirely on CNG alone. The company has claimed a 102 km per kg mileage on CNG and 65 km per litre in petrol mode. With CNG priced at ₹76.6 per kg compared to petrol at ₹94.72 per litre in Delhi, the bike's running cost is half that of a comparable 125cc motorcycle.

"High running cost is a major pain point for the commuter segment and we believe this is a game changer product," said Rajiv Bajaj, managing director, Bajaj Auto Ltd. "We did not ask for subsidies for this from the government as it is unsustainable. But the government should review GST for clean fuels. In ASEAN markets that have much higher per capita income, GST (on two wheelers) is between 8-14%. What is the rational for 28% GST in India?"

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"We have done our bit and kept the price at less than ₹1 lakh. My plea is for the government to do its bit and reduce GST to 12%," he added.

Targeting the commuter segment

Commuter segment motorcycles, classified as those with engine sizes between 100-125cc, are priced between ₹75,000 and ₹90,000. This segment remains crucial, accounting for nearly three of every four motorcycles sold in the country.

Overall, the two-wheeler market leader Hero MotoCorp dominates the segment with over 55% share, while Bajaj holds 16.2% share. However, the segment has yet to return to the peak levels of 2018-19, when over 10 million commuter bikes were sold.

"Commuter segment sales are around 650,000 units per month and we sell around 150,000-170,000 units out of this. So the headroom for growth is significant," Bajaj said. "A 30% penetration in this segment would give us volumes of 200,000 units and it would go up to 500,000 units at 80% penetration."

Challenges and market potential

The share of CNG vehicles is growing in both passenger vehicles and three-wheelers, where Bajaj Auto is the market leader. However, a lack of adequate refilling stations and long queues may deter consumers.

"Motorcycle customers are conscious of fuel mileage and power. CNG improves mileage but looses on power. It can help address small group of only fuel cost conscious customers," said Pramod Amthe, head of institutional equity research at Incred Capital. "But considering EV provides lowest cost of fuel, consumer has better choices to select. Hence CNG could have been easy win 5-years back, but with EV alternatives, its going to challenging. The higher upfront cost, needs to be recouped by fuel savings, which seems apt for 2W fleet owners only."

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The Freedom will initially be available in Maharashtra and Gujarat, with plans to expand to other parts of the country by next quarter. For now, Bajaj Auto expects sales of 10,000 units per month, aiming to grow to 50,000 units per month by the end of the year.