In an exclusive interview with CNBC-TV18, Rajiv Bajaj, Managing Director of Bajaj Auto, said that improved access to magnets has allowed deliveries of the Chetak scooter and electric three-wheeler GoGo to resume at scale.
“In July, we thought August could be a zero month for Chetak and GoGo. But the situation has changed very much for the better. We are now looking at 15,000-plus Chetaks and around 7,000 GoGos in August,” Bajaj said.
While supplies of heavy rare earths remain constrained, Bajaj confirmed that shipments of light rare earths (LRE) began clearing three to four weeks ago. He noted that this process started before recent diplomatic exchanges between India and China but appears to be gaining momentum.
On policy, Bajaj welcomed the government’s proposal to cut GST on two-wheelers under 350cc from 28% to 18%, but argued that the rate is still high compared to global peers, where taxes range between 8% and 14%. He urged policymakers to apply the cut uniformly across all segments to avoid distortions.
Despite temporary demand deferment ahead of the GST transition, Bajaj expects festive season sales to recover swiftly. He added that exports are showing strong growth in Latin America and ASEAN markets, with volumes likely to exceed 2,00,000 units a month.
With supply stabilisation, Bajaj Auto aims to push Chetak volumes to 40,000 in September and over 10,000 electric three-wheelers, strengthening its position as India’s largest EV maker by volume and revenue.
Below is the verbatim transcript of the interview.
Q: You have said that the deliveries of Chetak have begun. This is because of improved supplies and also because you’ve acquired rare earth magnets from different sources. What is the company’s ability right now to deliver and produce these products?
Bajaj: I had said sometime in July that, given how the situation was then, we were looking at possibly a zero month in August as far as both our electric Chetak and our electric three-wheeler, the GoGo, was concerned. But I’m happy to say that the situation has changed very much for the better, and we are now, hopefully in August, looking at 15,000 plus of the Chetak, which would be a little more than half our normal monthly production, and hopefully something in the neighbourhood of 7,000 of the electric three-wheeler, the GoGo. That’s for August. But again, I must say, that’s how things stand today, based on the availability of magnets as we see them at the moment. Hopefully, the situation gets better from here onwards.
Q: The sense one gets from sources is that after recent positive interactions between Indian and Chinese foreign ministers, China has started lifting restrictions on the export of rare earth magnets to India, and consignments have started to flow. What is your sense of the situation?
Bajaj: I’ll tell you what our experience has been. As far as heavy rare earths, or HRE as they’re called, are concerned, as of now, we don’t see any movement on that front. As of the day before yesterday, when we inquired about this, after hearing reports in Indian media, the news from China was that nothing has changed there with regard to HRE. So, maybe it’s a work in progress, but as of now, we have heard nothing on HRE.
As far as LRE is concerned, we started receiving clearance for our shipments approximately three to four weeks ago. Very slowly in the beginning, with a lot of testing, documentation, and delays at laboratories and ports, but it started about three to four weeks back. So, in that sense, I would just make the point that it didn’t coincide with any visits from India to China or vice versa. It’s not an automatic outcome of that. This had started before. But what we are seeing now with respect to LRE, or light rare earths, is that the slow process of movement is accelerating. That may suggest that these talks have had some positive impact.
Q: Let me also ask you about the government’s plan to reduce GST on two-wheelers, four-wheelers and the automobile industry in general. So, the 28% slab will become 18% for two-wheelers under 350 CC. How do you see this move? Is this a positive step going forward for Bajaj Auto and for the two-wheeler industry?
Bajaj: This is a very important subject, and I would like to make a couple of points. First of all, some of us, including myself, have been talking about this for years now, whenever we meet people in Delhi—ministers, bureaucrats, etc. As is well known, especially after the impact of Covid, the two-wheeler industry has not really recovered and come back to pre-Covid levels, despite all the efforts everyone has made.
I’m not an expert on cars, but I believe the same is true, especially for the lower half of the pyramid as far as cars are concerned. A brilliant fellow once said to me very simply, “inflation is greater than income.” That’s been the problem for the last five years—the common man has been hit very hard by inflation, while the job market and wage situation have been very difficult. So, this context is very important.
Coming specifically to your question, I’d like to make two sharp points. First, on the 18% GST—for two-wheelers, when you compare with other major two-wheeler markets of the world—Brazil, Thailand, Indonesia, Malaysia, Vietnam, etc—the corresponding rates there are between 8% and 14%. On behalf of Indian consumers, I would still say to the authorities that reducing it to 18% from 28% is welcome, fabulous, fantastic, but it is still high compared to the global median of 12% by as much as 50%.
The reason I make this point is not to say I’m not appreciative. I’m deeply appreciative. But the point is about the CC classification. Over 97–98% of everything sold in this country is under 350 CC. My view is that when such policy changes are implemented, they should be kept simple. Why not just 18% for everything? By excluding products above 350 CC, we’re excluding perhaps by volume the last 1–2%. What are we really achieving by doing that?
There are two downsides. One, it creates distortions in the product portfolio of companies. Wherever you draw the line — 200 CC, 250 CC, 350 CC — you are forcing manufacturers to realign their product portfolio, which means unnecessary work in engine, transmission and vehicle design to comply with this norm or this line that you artificially draw. This has no value for the customer, environment, employment or company, it only solves the purpose of fulfilling some new arbitrary policy.
Second, it creates a distortion in global alignment. India is already too low in the value chain. By making such policies, we are dumbing down the customer, saying the Indian consumer should only buy a 100 CC or 150 CC bike. Why? If he wants to buy a higher CC bike, let him do so affordably, and in turn you will strengthen companies and Make in India by making higher CC motorcycles viable. This helps the Indian supply chain, competitiveness, and global positioning.
Q: Now, in the interim, there is also worry in the industry that because there is a GST cut in the pipeline, the GoM has also decided there should be two slabs — a 5% slab and 18% slab, and then a sin rate of 40% for a few goods. This has to be approved by the GST Council. In the interim, do you expect a slowdown in sales? Are you seeing that impact in the festive season?
Bajaj: There will be a slowdown, but that needs to be qualified by the time period. The slowdown has already started, let’s say for example, the new policy comes into effect from October 1, definitely the industry will see a slowdown between now and the end of September. But there’s no way around this. It’s a small price to pay for a very big gain, because in October that demand will come back. The consumer is not going anywhere. The slowdown is only a deferment; it’s not like they’ve shelved plans to purchase. So, if you look at September to November, overall there will be no slowdown, but a salutary effect. The sooner the new regime kicks in, the better.
Q: Could you also give us a sense of your export pickup, the kind of uptick you see across segments?
Bajaj: Last year, the second quarter was our best quarter ever in our history, and we are hoping to exceed that this quarter, despite some headwinds with our domestic motorcycle portfolio — partly due to delays in product plans, and with Chetak because of the shortage of magnets. But the positives are four- KTM is doing really well with new products. Triumph is doing really well on the back of new products. The three-wheeler, both ICE and EV, where we became market leader last quarter, is doing very well. Exports, we are looking at over 20% growth, coming close to 2,00,000 a month, which was our normal pre-Covid. This is despite our biggest market, Nigeria, being down by more than half. What’s heartening is the growth in rewarding markets — not only in parts of Africa, but especially in LATAM and ASEAN. Markets like the Philippines, Sri Lanka, Mexico, and Colombia are looking really good. That means sales of Pulsar, Dominar, and three-wheelers will be very strong, which is good for both top and bottom line.
Q: What is the kind of EV offtake? You told us you’re looking at about 15,000 scooters in August and 7,000 electric three-wheelers. Going forward, what will the run rate be like?
Bajaj: Again, I must qualify by saying every day is a new day as far as magnets are concerned, as we try to stabilise. But if supplies come in as I believe they will, then we are going to push very hard to achieve new highs in both these brands. We acquired leadership in both these brands in recent months. For Chetak specifically, we would push closer to 40,000 units in September. For the electric three-wheeler, we would look to exceed 10,000 units. Already we are the largest EV company in India by volume and revenue — not just in two-wheelers, but across two, three and four-wheelers. I hope that with a better, normalised supply situation, we will be able to take this to the next level next month.