Bajaj Auto plans Rs 500 crore capex for EV business in FY24

With an aim to scale its electric business, Pune-based Bajaj Auto is planning to invest Rs 500 crore capex in the electric vehicle segment, the majority of which will go towards building capabilities for its upcoming electric three-wheelers, a top company executive said. 

According to Dinesh Thappar, CFO Bajaj Auto, in the last fiscal year, the company invested largely in putting up the enablers for the Chetak business, augmenting the R&D team, and establishing a dedicated dealership for its Chetak e-scooters. 

"In the ongoing financial year, we want to scale our electric vehicle domain, for which we have lined up a capex of Rs 500 crore. Our maiden electric three-wheeler will be out in the market in the next few weeks. A bulk of the investment will go towards equipment needed for expansion and scaling up of volumes at our Chetak Technology plant in Pune for electric three-wheelers. We will also be spending on creating related infrastructure," Thappar told Autocar Professional. In the last fiscal, the company spent above Rs 1,000 crore on its two entities, Bajaj Auto and Chetak Technology. 

In June, the company launched an electric vehicle manufacturing unit under its wholly-owned subsidiary, Chetak Technology with an initial capacity of 500,000 units in the first phase for electric two-wheelers. At present, Bajaj Auto has about a 75 percent market share in the domestic three-wheeler market.

Overall, the company is looking to invest Rs 700-750 crore capex in FY24 on debottlenecking operations to enhance electric vehicle component capacity amid an expected surge in its EV volumes. The company is working on expanding the supply chains of its electric vehicle components relative to its scale.

“Currently,  we are producing 3,000 -3500 units per month, which is not enough to meet the demand. In the months ahead, we will be conducting debottlenecking exercises to ramp-up EV component volumes to about 10,000 units per month,” Thappar added.

In an analyst call, company management stated that Bajaj Auto is not perturbed about the potential FAME subsidy withdrawal going ahead for electric two-wheelers. The company is also confident of reducing the cost of Chetak in the coming months. "We are planning to expand monthly retails of Chetak scooters to 10,000 units per month from the current 6,000 units per month," Rakesh Sharma, Executive Director, Bajaj Auto said over the call.

The company is creating a separate dealer network for EVs and will expand Chetak availability from 85 cities presently to 120 cities by the middle of FY24.

In January-March 2023 Bajaj Auto reported a 12 percent jump in its consolidated net profit to Rs 1,704.74 crore, aided by sales growth in the domestic market. It  reported a net profit of Rs 1,526.16 crore in the same period last year.

Meanwhile, total revenue from operations also rose 12 percent in the quarter under review from Rs 8,929.23 crore in the year-ago period. Growth in the company’s domestic business partially offset the drop in exports, which had arisen due to the challenging macroeconomic conditions overseas.

In FY23, the company recorded its highest-ever revenue, up 10 percent at Rs 36,428 crore despite constrained supplies early on and particularly challenging overseas markets for most of the year. Spare part revenue registered an all-time high, the company added. 

During the year under review, EBITDA, at Rs 6,551 crore, was up 25 percent YoY on the back of a solid margin expansion of +210 bps and a PAT that clocked Rs 5,628 crore. On the volume front, the company sold a total of 18,05,883 units of two-wheeler in the domestic market in FY23, up 10 percent YoY. 

According to the company, its balance sheet remains robust, with surplus cash of Rs 17,445 crore as of March 31, 2023. The consistent, robust cash generation fuelled ongoing competitive investments and a share buyback.