Bajaj Auto Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Record revenue, margin steady: Revenue crossed INR13,000 crores for the first time, up 22% YoY, while EBITDA margin held at 20.2% despite absorbing half of commodity inflation and investing behind the Freedom 125 and Chetak scale-up.
• Electric portfolio hits EBITDA breakeven: The combined e2W plus e3W portfolio was EBITDA-flat in absolute terms in Q2, with profitable e3W scale-up offsetting the Chetak drag, a milestone that removes the cash-burn narrative.
• Chetak doubles market share, new platform coming: Market share rose from ~10% to 19% YoY; a refreshed range launching mid-November on a new, lower-cost platform aims to challenge for EV leadership, though the path to standalone profitability still depends on where market pricing settles.
• Exports recovering, Africa still a drag: LatAm led with 20%+ growth and Mexico sports-segment leadership, while Africa’s decline rate slowed to minus 9%; Nigeria is recovering in small steps but remains fragile on currency.
• What to watch next quarter: Whether the new Chetak platform’s cost reduction translates to margin improvement or gets consumed by competitive pricing, the pace of Freedom 125 scaling to 40,000 units/month, and whether Africa flips to mildly positive YoY as management expects if current run rates hold.

Domestic 2-Wheeler: Mix, Momentum & the Freedom Bet

• 125cc+ segment now 55% of industry: The shift from 42% five years ago validates Bajaj’s strategy of concentrating over 75% of its own sales in the top half, with a healthy impact on both top line and bottom line.
• Pulsar lineup invigorated: A new sporty 125cc Pulsar launched, and the NS400Z together with upgraded 250s is clocking nearly 3,000 units in retail, reinforcing the drive for leadership in the premium commuter space.
• Freedom 125 adoption broad-based: The largest single customer cohort is from the 125cc segment itself but accounts for only 15–20% of buyers; the product is drawing from 150cc, scooter, and even 100cc entry-level segments, suggesting the addressable market may be wider than initially scoped.
• Scaling to 40,000 units/month by Q4: Capacity is rising from 30,000/month in Q3 to 40,000/month in Q4; 95% of the addressable CNG market was covered by early October, and management expects other OEMs’ CNG plans to help build infrastructure and strengthen the case for lower GST on CNG 2-wheelers.
• Margins are a conscious investment: Freedom margins are not close to the rest of the motorcycle portfolio; management is deliberately investing behind the franchise as a strategic priority, so near-term profitability takes a back seat to scale.

Thapar: "At this point of time, we are clearly making an investment behind growing the Freedom franchise. So, margins are not clearly close to where the rest of the motorcycle portfolio might be. It's a very conscious decision that we've taken to really drive, like I said, this product is a strategic priority."

• Festive season underwhelmed: The motorcycle industry was flattish at 1–2% growth through Dussehra versus an expectation of 5–8%; full-season growth is now expected closer to 5%, a watchpoint for Q3 domestic volumes.

Electric Vehicles: Chetak Scale-Up & the Path to Leadership

• Chetak market share doubled to 19%: From ~10% in Q2 FY24, Chetak is now solidly number three and almost shared number two in September; management expects momentum to accelerate with the refreshed range.
• New platform launches mid-November: An entirely refreshed and upgraded Chetak range on a new platform will be introduced later this quarter, with significantly improved cost structures; further cost reduction is expected between Q3 and Q4 as the new platform comes into play.
• Distribution expanding rapidly: Chetak is in 250 exclusive stores and ~3,000 shared stores, with shared stores rising to 4,000 over 3–4 months; exclusive stores drive the majority of sales and set benchmarks for customer care and brand development.
• Breakeven depends on pricing, not volume: Management declined to give a breakeven volume, stating the driver is the cost-price equation, not operating leverage; the new platform will reduce costs, but where market pricing settles and how much gets offset by discounting will determine the path to standalone profitability.
• Chetak is the umbrella brand: Management is deliberately retaining the Chetak name across scooter models, viewing it as a valuable asset that draws customers; multiple models will sit under the Chetak umbrella.

Thapar: "I can tell you that we will certainly get better on cost structures with the new platform on Chetak that comes out later this quarter. But where pricing settles and how much of that, will get offset by the price table moving down or by discount in the market will determine the path to profitability in the future because our intention is to remain very competitive."

• E3W market share rising: Electric 3-wheeler market share in EVs increased to 35%, just short of leadership; e-autos are now available in 700+ locations covering 90–95% of the industry, and a substantial range expansion begins end-November with new products entering stores almost every month.

Electric Portfolio Economics

• Combined portfolio EBITDA-flat in Q2: The entirety of the electric portfolio (e2W plus e3W) delivered flat EBITDA in absolute terms; the scale-up of the profitable e3W portfolio and cost reduction on Chetak offset the drag, meaning there is no cash burn on the electric portfolio.
• But a margin drag persists: Because the enterprise operates at 20% margins and the electric portfolio is flat, there is a dilution effect on overall margins; the drag will narrow as Chetak’s cost structure improves and e3W scales further.
• Chetak scale-up largely self-funded: Much of the expansion from 20,000 units last year to 70,000 currently has been funded out of cost reduction efforts, which is why the portfolio has grown without a material drag on enterprise margin.
• PLI benefit not quantified: Management declined to specify the PLI contribution magnitude in Q2, citing many moving parts including expansion impact, mix impact, and material cost; a third variant received mid-quarter certification.

Thapar: "While as a company, we've already spoken about it, I want to reiterate yet again as we speak to you that in the entirety of our electric portfolio, which is electric two-wheelers and electric three-wheelers, our EBITDA in the quarter has been flat in absolute terms."

Exports: LatAm Surges, Africa Bottoms

• Steady sequential recovery continues: The number of countries in stress conditions is slowly reducing; Q3 is expected to continue the trajectory of 10%-plus improvement over the previous quarter, with both revenue and EBITDA growth outpacing volume growth due to a richer mix.
• LatAm leading with 20%+ growth: Leadership consolidated in key countries including Mexico, where Bajaj has acquired leadership in sports segments and Dominar sales in Mexico now exceed Dominar sales in India; focus has shifted to markets like Mexico, Central America, Colombia, and Peru.
• Africa decline rate slowing: Africa declined at minus 9% in Q2, an improvement; if the same run rate continues in Q3, Africa could be mildly negative to mildly positive YoY. Nigeria benchmark sales dropped to 5,000 units in April but recovered to 25,000; recovery is expected in small steps, with caution due to currency fragility.
• Network-first strategy in Africa: Bajaj’s mostly exclusive retail network is a competitive advantage versus wholesaler-dependent competitors; efforts are focused on keeping the network together, not burdening dealers with stock exposure, and providing localized activation and support to minimize attrition.

Sharma: "I think we got Mexico at just the right time. In Mexico, the motorcycle industry is growing up by 25% or so. And I can tell you that in the sports segments, we've already acquired leadership, and we are a brand to reckon with over there now."

Margins, Costs & Capital Allocation

• Margin resilience despite headwinds: EBITDA margin held at 20.2%, with 40 bps YoY expansion driven by favourable FX realization and operating leverage; commodity cost inflation of ~50 bps QoQ (copper, natural rubber, cast iron, aluminium, noble metals) was half offset by selective price increases, with the remainder absorbed through other levers.
• Raw material-to-sales rose 130 bps QoQ: The increase was largely driven by Chetak expansion, with a very small contribution from filling in ~30,000 Freedom units; commodity net of pricing was only a 25 bps hit.
• Employee costs fell ~10% QoQ: Driven by lower variable payouts (Q1 had prior-year variable payouts), lower long-term incentive provisions, lower ESOP costs, and a slight transfer of employees to the Chetak Technology R&D subsidiary.
• Commodity outlook flattish for Q3: Some watch-outs on rubber, polypropylene, and platinum, but other commodities are stable to benign.
• OBD-2 norms (April 2025) manageable: The next phase will require additional sensors and diagnostics with a cost increase in the same vicinity as OBD-1, not significant.
• BACL turning the corner: The captive finance company now serves ~70%+ of stores, on track for 100% by January 2025, and started posting cash profit in September; penetration in the electric portfolio is 30–34%, similar to ICE.
• BACL capital infusion: A further INR1,200–1,400 crores is expected in H2, taking total infusion to INR2,200–2,300 crores; AUM is targeted at ~INR10,000 crores by fiscal year-end.

PMAG & Consolidated PAT

• Consolidated PAT gap explained: The ~INR600 crore gap between standalone PAT (~INR2,000 crores) and consolidated PAT (~INR1,400 crores) primarily arises from Bajaj’s share of losses of Pierer Mobility AG (PMAG) through the BAIH BV holding structure; PMAG reported a loss of EUR17.2 crore for H1 2024 versus a profit of EUR5.3 crore in H1 2023, driven by a US sales decline, bicycle segment restructuring expenses, and inflating European production and personnel costs.
• Deferred tax provision of INR211 crores: An exceptional one-time provision necessitated by Finance Act 2024 amendments withdrawing indexation benefit on long-term capital gains for debt mutual funds purchased before 1 April 2023; this is a deferred tax provision, not a cash outflow, and actual tax paid at redemption will differ.
• PMAG outlook not guided: Management declined to comment beyond PMAG’s public guidance from August 26, saying any developments are best commented on by PMAG.

Guidance & Commitments

Key Metrics