Bajaj Auto Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Strong quarter, EV supply chain the only cloud: Revenue grew 6% YoY on flattish volumes, powered by mix, while exports hit an all-time revenue high and EV profitability surged to near double-digit EBITDA margins. The one drag: a HRE magnet shortage that cut Chetak production by 50% in July.
• Exports are back as the growth engine: Volumes grew 16% YoY, with Bajaj outpacing the industry in 25 of its top 30 markets. The KTM Austria restructuring resolved, unlocking a suspended export stream, and Brazil is scaling toward 50,000 units annually.
• Domestic motorcycles: a deliberate two-speed strategy: Bajaj is ceding share in the low-profit 100cc segment to concentrate on 125cc-plus, where sequential share improved by ~3 percentage points. Management expects this construct to persist.
• EV profitability has turned the corner: The portfolio moved from deep losses to near-double-digit EBITDA margin, with some Chetak models already EBITDA-positive. The enterprise-level margin drag has shrunk, making expansion more sustainable.
• What to watch next quarter: Whether the HRE magnet supply chain normalizes by quarter-end as guided, the pace of the promised margin rebuild toward FY25 averages, and how much of the rupee tailwind gets invested into competitive actions versus flowing to the bottom line.

EV Portfolio: The Profit Inflection & The Supply Chain Hiccup

• Profitability transformed: The EV portfolio moved from a "red ocean" to very close to double-digit EBITDA margin. Profitable electric 3-wheelers now subsidize Chetak, and a couple of Chetak models on the new floorboard battery platform have already turned EBITDA-positive.
• Platform shift completed: With the launch of the affordable 3001 variant, the entire Chetak portfolio now sits on the new platform, which delivers superior functionality, better performance and much better unit economics than the earlier architecture.
• E-auto leadership attained: Bajaj captured pole position in the electric 3-wheeler category with over 35% market share, driven by the 7012 widebody variant tailored for large-ticketing semi-urban and rural use.
• Supply chain disruption: Non-availability of HRE (heavy rare earth) magnets began compromising production in June. July saw a 50% shortfall in Chetak output and an expected 25-30% shortfall in e-autos. Management is pursuing multiple resolution paths: working with authorities to reopen HRE flows, developing alternate sources, and exploring non-HRE ferrite-based alternatives.
• Resolution timeline: Complete restoration of supply expected by end of the quarter; full derisking of the supply chain should take six to nine months. Next-quarter delivery guidance: 50-60% of plans on electric two-wheelers, 70-80% on electric three-wheelers, with the situation evolving daily.
• E-rickshaw entry: Extended testing completed; launch in a few key markets by mid-August. The approach is to start small, observe dynamics, and craft a playbook to upgrade the large low-quality lead-acid e-rick market to a superior solution at premium pricing. Scale-up phase likely begins around February to May.

Sharma: "From the red ocean we were in, not too long ago, to now getting to EBITDA margin for the entire portfolio, very close to double digits."

Exports: Record Revenue & Broad-Based Recovery

• All-time high export revenue: Even with volumes still 20-25% below FY22 peaks, export revenue reached a record, driven by better dollar realizations and a richer product mix led by Dominar and Pulsar. Pulsar alone grew over 21%.
• Broad market outperformance: In 25 of the top 30 markets, representing over 70% of the emerging market opportunity, the industry grew 17% in Q1; Bajaj outpaced at 27%. Latin America and Asia are firmly on a growth path; some African countries, particularly Nigeria, remain difficult.
• Ex-Nigeria strength: Exports are clocking the highest-ever retail outside Nigeria. The 40,000-unit gap from Nigeria's peak has been fully covered by all other markets combined.
• KTM Austria restart: With the restructuring plan confirmed by the Austrian insolvency court on 16 June 2025 and no further appeals possible, production and business operations resumed, unlocking KTM exports from India that had dropped to nil during the receivables risk period. This stream historically represented 5-6% of total exports.
• Brazil scaling well: Sales touched 7,000 units in Q1. Capacity is expanding from 30,000 to 50,000 units per annum this year, with further expansions planned for FY27 and FY28. Dominar has been accepted very well; Pulsar 150 was recently introduced for the commercial and delivery segment. The approach is calibrated, not big-bang, ensuring a positive P&L.
• Growth tempo: Management expects to maintain similar export growth levels in coming quarters, supported by emerging market performance, strengthening competitive position, and the return of KTM exports.

Sharma: "I realize all these movie producers feel like. They make a good movie, but till the time it hits the screens, nobody knows it is going to be hit or a flop... I was pretty relieved, all of us were pretty relieved that Dominar has got accepted very well."

Domestic Motorcycles: The 125cc-Plus Bet & The 100cc Trade-Off

• Market weakness: The domestic 2-wheeler industry was flattish to slightly negative in Q1. Factors included advancement of monsoons, high urban inflation (rental etc.) reducing purchasing power, and a tendency to postpone purchases to the festive period shaped by e-commerce behavior. The 125cc-plus segment outperformed 100cc.
• Deliberate share trade-off: Bajaj underweighted tactical actions in the low-profitability entry-level 100cc segment, resulting in a loss of about 2 percentage points of market share sequentially. Strategic focus remains squarely on 125cc-plus, where product and pricing interventions initiated in late Q4 delivered a sequential market share improvement of about 3 percentage points, taking overall motorcycle share to 15%.
• The 125cc project: Management are early believers in the 125cc segment and argue the best way to take share in 100cc/110cc is to attack from the top. A new affordable 125cc bike is in the pipeline, but management declined to disclose the launch timeline or whether it will carry the Pulsar brand.
• 100cc structural weakness: The 100cc segment remains weak, particularly in urban areas, where finance companies are tightening norms due to instances of multiple loans, affecting the weaker sections who typically buy 100cc motorcycles. Deep rural areas (Gram Panchayats) are still struggling; larger rural and agricultural trading towns are improving.
• Market share outlook: Management expects the construct to remain similar to Q1: advance in 125cc-plus, perhaps decline in 100cc based on competitive intensity, resulting in slightly slower advancement on overall motorcycle market share.
• Dealer viability defended: When an analyst raised concern about dealer viability with market share slipping closer to 11%, management pushed back sharply, stating dealers "have never had it so good," and rejected the premise that a dramatic market share shift is desirable, calling it unsustainable based on past experience.

Sharma: "The timelines have not shifted, but please give me the benefit of keeping some surprise up my sleeve. I can't be so transparent."

Margins: Moderation, Mix & the Rebuild Path

• Sequential moderation: EBITDA margin moderated 50 bps QoQ, almost entirely on account of adverse dollar realization that played out through April and May. The rupee averaged INR85.6, about INR1 lower than the previous quarter.
• Commodity cost contained: Inflation from commodity costs and OBD II-B norms landed at about 70 bps, versus the 100 bps originally estimated. Cost savings initiatives and better steel settlement rates later in the quarter cushioned the impact.
• Pricing balanced: Selective pricing actions were taken: prices rose in parts of the portfolio while dropping in parts of the motorcycle business to revive competitive growth momentum. Net pricing ups and downs almost balanced out.
• Mix as the margin lever: The net commodity inflation was more than made up by a richer-than-anticipated mix, with the revival of KTM exports being a key factor. Double-digit growth on premium motorcycles, commercial vehicles and Chetak drove the highest-ever Q1 domestic revenue.
• YoY margin: The 50 bps YoY drop had different drivers: favorable currency movement was offset by an increase in other expenses as the business has grown.
• Next-quarter outlook: Management expects flat cost versus price, with some pricing actions already taken to broadly offset inflation. The rupee, currently trending favorably, is expected to be a tailwind. Margins should trend back toward FY25 average levels, though some of the dollar tailwind will be invested into competitive actions.
• Operating leverage gated by EV supply: Where operating leverage ultimately settles will be a function of how much supply can be pulled through on the electric front, given the HRE magnet constraints.

Probiking, Spares & BACL: The Earnings Diversifiers

• Probiking growth: KTM and Triumph together built nearly 26,000 units domestically, marking 20% YoY growth and market share gain in their segments. Growth was driven by authentic product launches, curated brand activation, and network expansion (Triumph now in 80 cities through 130 stores). New launches included the Triumph Scrambler 400XC and KTM Enduro 390 R.
• Spares momentum: The spares business grew 19% on the back of better distribution and portfolio management, and looks set to maintain the growth tempo.
• BACL profit milestone: BACL delivered PAT of INR102 crores in Q1, nearly double its full-year profit of last year, with penetration scaling to 40%-plus levels, 0.1 crore customers acquired, and AUM of INR12,000 crores. The business is built on a digital-first model with robust operational efficiencies.
• PAT resilience: Overall PAT was nearly at par with the Q3 FY25 peak (INR2,109 crores) in a quarter without festive season tailwind, reflecting underlying earnings resilience across the diversified portfolio.

Guidance & Commitments

Key Metrics