Bajaj Auto, a prominent player in the Indian automobile industry. It has experienced an impressive 130% surge in its stock price over the past year. This remarkable rally can be attributed to the rapidly expanding electric vehicle (EV) market. Moreover, investors optimism regarding Bajaj Auto’s potential to capitalise on this thriving sector. As the automotive landscape continues to evolve, Bajaj Auto is strategically positioning itself to leverage emerging opportunities while maintaining its strong foothold in traditional segments

Industry Overview 

India’s auto component industry is becoming a global sourcing hub, exporting over 25% of production annually. It targets $30 billion in exports by FY26 and $7 billion investment by FY28 for localization. With 100% FDI and supportive policies, the sector is growing. India’s cost-effective manufacturing keeps costs 10-25% lower than Europe and Latin America.

Contributing 2.3% to GDP and employing 1.5 million, forecasted to reach 5-7% of GDP by 2026, creating 3.2 million jobs. The industry grew at 6.35% CAGR from FY16-FY22, reaching $56.5 billion. H1 2023-24 turnover was $36.1 billion, up 12.6%. Domestic OEM supplies lead at 66%, exports at 22.3%, and aftermarket at 12%. The sector aims for $200 billion by FY26.

Furthermore,  if we look at the Indian two-wheeler market it presents a complex landscape, with valuable lessons to be drawn from the mature ICE (Internal Combustion Engine) scooter industry. Consumers clearly prefer scooters in the INR 75,000 to INR 80,000 price range, which accounts for about 85% of the scooter market. This pricing trend provides crucial insights for manufacturers as they develop strategies for both ICE and electric vehicles.

Company Overview Of Bajaj Auto

Bajaj Auto founded in 1926 by Jamnalal Bajaj, has a rich history spanning nearly a century. From its humble beginnings, the company has grown to become one of India’s largest two-wheeler and three-wheeler manufacturers, with a strong presence in both domestic and international markets.

Bajaj Auto pioneered personal transportation in India with iconic models like Chetak and Pulsar. Bajaj Auto’s production capacity spans multiple plants, including Waluj, Chakan, and Pantnagar, with a combined annual capacity exceeding 7.11 million units. The firm has expanded internationally, exporting to over 70 countries.

Bajaj Auto’s innovations include the DTS-i technology and the recent launch of electric vehicles. The company’s success is linked to the Bajaj family’s leadership, from Jamnalal to Rahul Bajaj. Synergies with Bajaj Finserv enhance vehicle sales through attractive financing options. With a rich history of over 79 years, Bajaj Auto continues to shape India’s automotive landscape through innovation and market leadership.

Segments Of Bajaj Auto

Domestic Motorcycle Business Unit

In Q4, Bajaj Auto’s retail sales grew at twice the rate of competitors, with particularly strong performance in the 125cc+ segment, where growth was four times that of others. The company now holds a 27% market share in the upper half of the market, just 2 percentage points away from leadership. This success is attributed to well-targeted new launches across various segments.

Commercial Vehicles

Bajaj Auto maintained its dominant position in the three-wheeler market with a 78% market share in FY ’24, up 5% from the previous year. The company is now focusing on expanding its presence in the EV three-wheeler segment, particularly in markets where ICE autos are restricted.

Chetak Business Unit (Electric Vehicles)

The Chetak electric scooter has climbed to the number three position in the market, up from sixth or seventh at the start of the year. Bajaj is rapidly expanding its EV network and plans to increase from 200 stores to 600 within the first half of the next fiscal year.

Pro-Biking Business Unit

This unit houses the KTM, Husqvarna, and Triumph brands. KTM had its best-ever year, and the company plans to introduce big bikes from KTM in select cities. For Triumph, Bajaj aims to scale up the domestic network to 150 stores and expand in overseas markets.

Future Outlook Of Bajaj Auto

• The company plans to launch its Brazilian plant by June. It also plans to expand into Europe and enter the Egyptian market with its Qute quadricycle.

• In the domestic market, Bajaj aims to solidify its position in the 125cc+ segment, where it has gained significant market share. The company will introduce six new Pulsar models in the first half of FY ’25, including its largest Pulsar yet. 

• Additionally, Bajaj will launch the world’s first CNG bike, targeting the mileage-conscious commuter segment and potentially disrupting the 100-125cc market.

• In the electric vehicle space, Bajaj is rapidly expanding its Chetak business unit. The company plans to increase its EV stores from 200 to 600 within the first half of FY ’25, alongside launching an upgraded Chetak model. 

• Bajaj’s three-wheeler segment will focus on growth through EV autos, particularly in markets where ICE autos are restricted. The company’s Pro-Biking business unit will introduce KTM’s big bikes in select cities and expand the Triumph network to 150 stores. 

• Bajaj also anticipates portfolio expansion for Triumph in the second half of the year. 

• Bajaj Auto faces challenges in stressed markets such as Nigeria, Bangladesh, Kenya, Egypt, and Argentina. However, the company sees opportunities in recovering markets, particularly in Latin America and ASEAN regions. New markets and segments, including Brazil and Europe, are being targeted for growth.

These initiatives, coupled with the recent launch of its captive finance company BACL, position Bajaj Auto for potential growth across various segments and markets in the coming fiscal year.

New Launches

1. The largest Pulsar model to date, expected in early May.

2. The world’s first CNG bike, aimed at mileage-conscious commuters.

3. Upgrades to the Chetak electric scooter and a new Chetak model in Q1.

Changes In Investor sentiment

Investor sentiment for Bajaj Auto exhibits noteworthy trends from March to June 2024. Promoter holdings remained steadfast at 55.06%, reflecting consistent confidence from the company’s core stakeholders. Foreign Institutional Investors (FIIs) showed a marginal decrease in their stake from 14.53% to 14.19%, possibly due to global market fluctuations or portfolio rebalancing.

Conversely, Domestic Institutional Investors (DIIs) increased their holdings from 8.47% to 8.73%, indicating growing optimism in the company’s prospects among local financial institutions. Public shareholding also saw a slight uptick from 21.88% to 21.92%, suggesting increased retail investor interest. The combined growth in DII and public stakes points to rising confidence from domestic investors, potentially driven by Bajaj Auto’s strong financial performance and strategic initiatives in the evolving automotive landscape.

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Financial Highlights Of Bajaj Auto

Revenue: Bajaj Auto has demonstrated robust earnings growth over the past five years, with revenue surging nearly 50% from 2020 to 2024. The company’s year-over-year revenue increased by an impressive 23%, reaching ₹44,870 crore in 2024 compared to ₹36,455 crore in 2023. This significant growth can be primarily attributed to strong performance in the domestic motorcycle and commercial vehicle segments.

Net Profit: The company has consistently increased its net profit at a compound annual growth rate (CAGR) of 10.28% over the last five years, showcasing its commitment to maintaining strong profitability even during economic challenges. In 2024, Bajaj Auto reported a net profit of ₹7,708.24 crore, a substantial increase from the previous year’s ₹6,060.21 crore.

Operating Profit Margin (OPM): After eight decades in the business, Bajaj Auto continues to improve its operational efficiency. The company’s OPM increased from 20% in FY23 to an impressive 22% in FY24, reflecting enhanced cost management and operational effectiveness.

Debt: Bajaj Auto has maintained a conservative approach to debt utilisation throughout its history. The debt-to-equity ratio slightly increased from 0.0 in 2023 to 0.03 in 2024, with an average of 0.01 over the past five years, indicating a strong financial position and minimal reliance on external financing.

Key Metrics Of Bajaj Auto 

Conclusion

Despite facing challenges in certain export markets and navigating the transition to electric vehicles, Bajaj Auto appears well-positioned for future growth. The company’s multi-pronged strategy—focusing on premium segments in motorcycles, expanding its EV presence, and targeting new international markets—provides a solid foundation for continued success.

With a strong pipeline of new launches and a clear vision for each business unit, Bajaj Auto seems prepared to capitalise on the evolving automotive landscape and maintain its position as a key player in the industry.

Written By Fazal Ul Vahab

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