The management said on Wednesday that Bajaj’s production of EV 2-wheelers will be 60% of the earlier planned output for the months of August and September, while 3-wheelers will see 75% of the planned output in the same period.
“Our production impairment started in June due to which our sales were also hit in Q1. Production was hit up to 50% in July,” Rakesh Sharma, executive director at Bajaj Auto Ltd, said at a media interaction after the release of April-June quarter results on Wednesday.
As a result of the crisis, the company said it has delayed several launches of electric 2-wheelers which were planned in the July to September period.
Moving towards light magnets
Sharma added that the Pune-based company has started moving towards light rare earth magnets from heavy rare earth magnets, which has helped in getting production back on track with situation improving month on month.
Rare earth magnets are classified into light and heavy categories. While heavy rare earths have been restricted by China, light rare earth magnets continue to be exported. The heavier the magnet, the better the performance of the motor running the vehicle.
Engineering teams of automakers are working on matching the performance using light rare earth magnets as companies have no visibility on resumption of heavy rare earth imports.
“We have no information from the government or suppliers when the flow of heavy rare earth magnets will resume,” Sharma said.
After the Bengaluru-based Ather Energy Ltd, Bajaj becomes the second 2-wheeler maker to move towards light rare earth magnets. Earlier, company’s managing director Rajiv Bajaj had said that August could be a zero-production month for its flagship Chetak EV 2-wheeler due to a shortage of rare earth magnets.
On Monday, Ather’s management told Mint that its dispatches to dealers will suffer an impact worth seven days of its volumes due to constraints on production in the second quarter.
The commentary on production hits comes during the period in which festive season is expected to boost sales of vehicles as consumers loosen their purse strings.
The country’s third-largest 2-wheeler maker, TVS Motor Company, said last week that it is just able to manage “day-to-day production” as it is currently exploring alternatives to limit the impact of rare earth magnet shortage.
In profit despite hiccups
Despite the hiccups in the past few months, Bajaj Auto managed to post a 14% year-on-year rise in net profit to ₹2,210 crore in the June quarter, while revenue increased 11% to ₹13,642 crore. The rise in profits came on the back of expansion in consolidated operating margin to 21% from 20% last year due to a 14% growth in exports and rising average selling price of vehicles.
The double-digit growth in exports to 419,447 units in the first quarter helped the company offset a 9% decline in domestic sales to 529,344 units. The average selling price of vehicles is higher compared to the domestic market.
The management indicated that sales during the first quarter were hit due to the rare earth magnet crisis.
“The outlook on exports remains positive with expectation of 14-15% growth during the year,” Sharma told reporters.
Moreover, Bajaj Auto’s rival and the country’s largest 2-wheeler manufacturer Hero MotoCorp also announced its results on Wednesday. Hero saw its net profit surge by 65% to ₹1,706 crore while its revenue slipped 0.3% to ₹10,037 crore during the first three months of the current financial year.
The surge in profits came on the back of listing of its associate company Ather Energy Ltd, which resulted in a ₹722-crore gain due to dilution of stake in the company.
“Our profitability and margins remained resilient, supported by strong demand for our entry & deluxe motorcycles and 125cc scooter segments. We are witnessing good traction in our electric mobility business (VIDA), and global operations also remained ahead of industry, reflecting the strength of our brand in international markets,” Vivek Anand, chief financial officer, Hero MotoCorp, said in an earnings release.
While TVS, Bajaj Auto, Ola Electric and Ather have provided updates about the rare earth magnet crisis, Hero has so far refrained from addressing the situation publicly. The discussions on the company’s situation are expected to take centre stage during a call with investors on 7 August.
Bajaj Auto shares closed 0.6% lower at ₹8,177 apiece on the BSE on Wednesday, while those of Hero MotoCorp slipped 1.5% to ₹4,474.50 each.
