BAJAJ AUTO LIMITED – Making it in India,Taking it to the world

Date Published: August 4, 2022

Company Overview:
Bajaj Auto Ltd was created in 1945 under the name BachrajTrading Corporation Private Ltd. In 1948, thecompany started to sell imported two- and threewheelers in India. In 1959, the company obtaineda licence from the Indian government tomanufacture two- and three-wheelers. In 1960,BAL became a public limited company. Bajaj Auto Ltd (Bajaj Auto) is an automotive manufacturer. The company develops, manufactures and distributes automobiles such as two- wheeler motorcycles, three-wheeler motorcycles and commercial vehicles. The company also manufactured and markets various spare parts and accessories. Bajaj Auto offers products in entry-level, commuter and commuter deluxe, sports and super-sports lines. It offers products under Avenger, Pulsar, Discover, Platina, Ninja, CT, KTM, RE Compact 2S, RE60, RE Compact 4S, and RE Optima brand names. The company has manufacturing facilities in India. It exports two and three wheelers in Africa, Asia Pacific, South Asia, Latin America, the Middle East and Europe. Bajaj Auto is headquartered in Pune, Maharashtra, India. BAL is partof the Indian conglomerate Bajaj Group. As ofMarch 2020, BAL consolidated its position as onethe world’s largest two-wheeler manufacturersand the world’s largest three-wheelermanufacturer and exporter. The company ownsthree manufacturing plants, two of them inMaharashtra state and one in Uttarakhand state.The three plants have a combined annualproduction capacity of 6.33mn units. The companyalso has an R&D centre in Maharashtra. At theend of FY2020, the company had 10,052employees. In spite of the negative effects ofCOVID-19 pandemic in India, BAL increased itscapital expenditure from INR 1.7bn in FY2020 toINR 2.2bn in FY2021. This represented an annualincrease of 26.9%. Moreover, the company’s R&Dcentre successfully completed all the productlaunches that were planned for the FY2021.Specifically, BAL introduced forty-one newmodels/versions of existing models: ninelaunches in the commuter segment; six models ofthe sport segment; three launches in the supersport or premium segment; and twenty-threelaunches in the commercial segment. In October2020, the company inaugurated an EV laboratoryto design and develop EV technologies and tomanufacture and test EV components andvehicles.

 

Industry Overview:
After the bad performance of the motor vehicle industry in FY2021 due to the rapid expansion ofCOVID-19 pandemic in FY2021, the automotive industry is expected to grow in FY2022, pushed by therecovery of the Indian economy. The two-wheeler segment will face a higher demand from thedomestic and export market as personal mobility will continue to be an important trait for consumers.The passenger vehicle segment will be mainly driven by pent-up demand from domestic consumers,however, the global shortage of semiconductors will negatively affect the rhythm of production. Thecommercial vehicle segment will benefit for the reactivation of industrial, construction andinfrastructure activities in India. However, the second and a potential third wave of COVID-19 mightdelay the rhythm of recovery.In FY2021, the Indian motor vehicle market fell by 14.1% y/y, recording domestic sales of 18.4mn units.Two-wheelers was the largest segment with a share of 82.2%, followed by passenger cars (13.5%),commercial vehicles (3.1%) and three-wheelers (1.2%). The weakened domestic demand for motorvehicles was driven by the negative effects of COVID-19 pandemic over the Indian economy(consumers postponed non-essential expenditures including motor vehicle purchases). Three-wheelerswas the segment with the largest fall in FY2021 (-66.1% y/y), followed by commercial vehicles (-20.8%y/y), two-wheelers (-13.2% y/y) and passenger vehicles (-6.1% y/y).Two- and three-wheelers exports expandedby 2.8% y/y and by 8% y/y, respectively, in Q3 FY2021. Compared to Q2 FY2022, two-wheeler exports fellby 1.1%, while three-wheeler exports grew by 6.3%. Quadricycle exports in Q3 FY2022 contracted by52.5% q/q and by 36.3% y/y.

 

Company Operation:
Automotive BusinessPerformance: Reported revenue of INR277,501.2 million for FY2021, which decreased 7.4% YoY, and recorded a CAGR of 9.0% during 2019-21. The segment accounted for 95.6% of the company’s revenue in FY2021. It reported operating loss of INR49,771.6 million in FY2021, which decreased 4.7% YoY.

Automotive BusinessKey Stats as of March 31, 2021: 1.8 million motorcycles exported – 0.2 million commercial vehicles exportedInvestments BusinessOverviewInvests in PT Bajaj Auto Indonesia, Bajaj Auto International Holdings BV and Bajaj Auto (Thailand) Ltd.

Investments BusinessPerformance: Reported revenue of INR12,674.2 million for FY2021, which decreased 14.1% YoY, and recorded a CAGR of 14.7% during 2019-21. The segment accounted for 4.4% of the company’s revenue in FY2021. It reported operating profit of INR12,642.7 million in FY2021, which decreased 14.1% YoY.

India GeographyPerformance: Reported revenue of INR1,63,302.6 million for FY2021, which decreased 15.1% YoY, and recorded negative growth of 0.2% during 2017-21. India accounted for 56.3% of the company’s revenue in FY2021.

Rest of the world Geography TargetMarkets Asia, Africa and Latin America.
Rest of the world GeographyPerformanceReported revenue of INR1,26,872.8 million for FY2021, which grew 3.9% YoY, and recorded a CAGR of 12.6% during 2017-21. Rest of the world accounted for 43.7% of the company’s revenue in FY2021.

 

Key Government Initiatives for Auto Sector:
The cost pressure on automobile makers is expected to ease following softening steel prices and duty cuts by central and state governments on fuel, which would bring down the cost of ownership of vehicles. This may lead to a recovery in gross margins of automakers, which contracted by over 500 basis points in the past 15 months as prices of raw materials, particularly steel, doubled. With the imposition of 15% export duty on a range of finished steel products. In other steel categories, an export duty of 15% has also been levied on pig iron. On the raw material side, the Government has increased the export duty by 58% and above Fe grade iron ore fines and lumps from 30% to 50%.

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