Bajaj Auto plans to invest Rs 750 crore in FY23 to ride on EV and premium push

Home-grown two and three-wheeler major Bajaj Auto will be investing Rs 750 crore in capital expenditure in the current financial year, FY23 to set up capacities of its electric vehicle (EV) facilities for two and three-wheelers and ramping up its premium motorcycle volumes. The CapEx for FY23 was amongst the highest annual investment made by the company in adoption of new technologies and capacity creation in recent times.

The company has been periodically investing in CapEx even during the tough pandemic years. The Pune-based auto major had spent Rs 620 crore and Rs 183 crore as CapEx in FY22 and FY21 respectively. The cumulative CapEx of the company from FY16 to FY18 stood at around Rs 640 crore and it invested Rs 195 crore in FY20. 

According to Dinesh Thapar, Chief Financial Officer (CFO), Bajaj Auto the current investment is a step-up over the past. “Capex for the first half is closer to about Rs 335-340 crore. The CapEx is going on clearly to establish the EV facility that we have for two-wheelers and also an EV plant for three-wheelers in Waluj. A part of it will also be spent on the expansion of a new site at our Chakan facility for premium motorcycles and then, of course, routine CapEx. So, I expect that to be Rs 750 crores for this year,” Thapar said.

The company posted a 50 percent sequential growth in the sales of its electric scooter Chetak and crossed the 10,000 units milestone during Q2 from about 6,200 units in Q1FY23.

In December 2021, Bajaj Auto established its Rs 300 crore electric two-wheeler plant in Pune's Akurdi region where it currently manufactures Chetak electric scooters. The plant has been designed to manufacture 500,000 electric two-wheelers per annum. The company had earlier hinted at introducing an electric model under the Husqvarna brand as well which means Bajaj Auto will also have a presence in this evolving segment too. 

"We have gradually increased our presence in 40 cities across the country. We are also working towards expanding the EV portfolio to cover different emerging segments and geographies. Over the next 18 months or so, you will see three or four introductions which will attack new segments, not the same segment, but it will be under the Chetak Umbrella,” Rakesh Sharma, Executive Director, Bajaj Auto said.

In the premium segment, the company has already expanded its Pulsar brand with a new 250cc model last year and is planning to come up with more models. “We are delighted with the acceptance of the new Pulsar platform. Combined with better supply, this has already helped us gain substantial market share across the country now. The new Pulsar platform will be expanded further in the coming quarters, thus, completely and substantively upgrading the Pulsar portfolio,” Executive Director Rakesh Sharma said. 

Renewed focus on 125 cc motorcycles 
On the motorcycle segment performance, while there has been muted demand for entry-level 100cc bikes particularly in rural areas, the company is witnessing significant growth for 125cc bikes. According to Sharma, since FY20, the industry has reshaped itself towards the 125cc segment, and it now constitutes almost 50 percent of the industry, while it was just about 40 percent three years ago. 

“For our company, 60 percent of our portfolio in Q2 was the 125cc plus segment as compared to only 46 percent in FY20. This is a key driver for improved profitability and a superior competitive position,” he said. In the September quarter, Bajaj Auto rolled out refreshed versions of CT 125 and Pulsar 125. 

“We will continue to direct our innovation energy to the 125cc plus segment, which appears to be enjoying tailwinds and growing faster than the overall industry. And this will help us improve both the profitability profile of the domestic motorcycle business unit as well as the market share,” Sharma added. 

During Q2, the company reported a 16 percent decline in its consolidated net profit to Rs 1,719 crore due to a sharp decline of 25 percent in overseas shipments. Meanwhile, its total revenue from operations rose to Rs 10,203 crore in the same quarter against Rs 8,762 crore in the year-ago period.