Bajaj Auto is steering through a storm of disruption, competition, and shifting consumer preferences. Can it stay ahead of the curve in a market that's changing rapidly?
31 May 2025 | 3869 Views | By Prerna Lidhoo, Ketan Thakkar, and Darshan Nakhwa
The year ended March 2025 has thrust the automotive industry into a high-stakes rally of unpredictability, and Bajaj Auto, one of India's most iconic two- and three-wheeler manufacturers, is right in the thick of it.
From the tremors of global geopolitical tensions rattling supply chains and currency markets to ...
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The year ended March 2025 has thrust the automotive industry into a high-stakes rally of unpredictability, and Bajaj Auto, one of India's most iconic two- and three-wheeler manufacturers, is right in the thick of it.
From the tremors of global geopolitical tensions rattling supply chains and currency markets to the subtle but sweeping shifts in consumer behavior, the company has had to navigate a terrain that's anything but linear. As rural demand remains sluggish, the premiumization trend grows alongside a renewed appetite for value-driven models in urban markets.
Adding to the stress, Bajaj has had to hold its ground against increasingly aggressive rivals: Hero MotoCorp is doubling down on electrification, TVS is expanding its global reach, and new entrants—including Ola Electric, Ather Energy, and others—are redrawing the rules of the game. As Bajaj Auto navigates a storm of transformation, competition, and shifting consumer tides, can the company stay ahead of the curve in a market that's changing faster than ever?
Turbulent Times
Rakesh Sharma, Executive Director at Bajaj Auto, doesn't sugarcoat his assessment of FY25. "It is the sign of our times that things are choppy, for one reason or another," he says capturing the mood of a year marked by volatility and flux.
"We face a wide and diverse competitive landscape. At one end, we compete in smaller CC bikes alongside premium partners like Triumph and KTM across multiple countries. On the other hand, in electric, we're up against startups, Chinese players, Japanese and Indian brands, as well as both small and large legacy companies. Each of these competitors follows their own strategic imperatives, which means we're not just contending with different companies—but with half a dozen fundamentally different strategies."
To adapt, Bajaj Auto has shifted its internal playbook. "We've started managing many aspects of the business on shorter time horizons. Of course, areas like product development or people policies still demand a longer-term approach. But when it comes to market response, pricing, marketing investments, or launching in new geographies, we've shortened our planning cycles." Agility, he says, is now more important than ever. "It's very difficult to sit in a room and predict the future in this environment. What matters is how quickly we can respond. That's why we review business performance closely every month, but we plan on a quarterly basis."
The turbulence he refers to is the result of multiple, overlapping disruptions. Global geopolitical tensions have sent ripples through supply chains, currency markets, and logistics systems. At home, the Indian consumer is evolving rapidly—shaped not only by economic forces but also by the strategies of large e-commerce platforms that now dictate demand cycles with aggressive, time-bound promotions. There's a shift in how consumers behave, with major e-commerce players clustering demand around festive periods. That adds unpredictability to planning and sales forecasting. "There are fundamental changes in consumer behavior, shaped by giant e-commerce companies which run very attractive schemes leading up to festive seasons, pushing demand to certain time buckets," he explains. "We have seen the ups and downs, the peaks and troughs of demand becoming sharper and sharper."
The challenges are deepened by the uneven economic growth across regions and social classes. "We have also seen that economic growth is not evenly distributed," Sharma said. "So, there is pressure on income distribution, and inequality, which has its own ramifications on the kinds of products that are made available. When you look at an average growth rate, what it hides is that there is strong variance in time buckets, geographic buckets, and consumer segments, which requires more nuanced management."
Despite these challenges, Bajaj Auto has positioneditself for the future. "We would certainly say that we have created more and more options for us to grow," Sharma says of the company's strategy. "At a strategic level, it is very difficult to anticipate what is going to happen, but it is more important for us to be prepared for any kind of scenario."
Bajaj has carefully defined its battleground—focusing on segments like motorcycles in the 100cc to 500cc range, three-wheelers, and electric scooters. "Having defined a geographic scope, which is largely India and emerging markets," Sharma continues, "Our endeavor has been to create platforms for growth."
Whether it's launching new brands like GoGo for electric autos, Chetak for electric scooters, or expanding into new markets like Brazil, the company is set up to leverage opportunities as they arise. "These are all outcomes of a strategy to have platforms of growth in position in our chosen background, so that we are able to harness wherever the opportunity arises."
Global Strategy: Building Platforms for Growth
Faced with the uncertainties of the global market, Bajaj Auto's approach is centered on building "platforms of growth" in carefully chosen battlegrounds. These battlegrounds are defined by product scope—primarily 100 to 500cc motorcycles, three wheelers, and electric scooters—and geographic scope, largely India and emerging markets. "Then in these markets, our endeavor has been to create platforms for growth. Now, depending on which segment or sector rises up, we have a platform over there," Sharma explains.
He says that the global market is more vulnerable compared to the domestic Indian market, largely due to the volatile nature of emerging markets. However, Sharma emphasizes that Bajaj's global footprint across 100-plus countries helps mitigate the risks. "The good thing in our case is that we are in more than 100 countries, and some countries are going up while others are going down," he says.
For instance, while Africa has started to recover, the company has seen a rise in demand in Latin America. "With the rise of Latin America, we have seen our mix dramatically improve." Despite these fluctuations, Bajaj remains cautiously optimistic about its international growth. "So, I would say international is more vulnerable because of individual country size and strengths, but collectively when you put all of them together, the pluses and minuses start to cancel out," Sharma says. The company is hopeful that, barring any geopolitical disruptions, it can sustain a positive trajectory. "We see at least in this year, if there is no geopolitical problem or disturbance, we see the recent growth trends of 15% plus," he adds.
In terms of specific markets, Bajaj Auto's foray into Brazil has been particularly noteworthy. Despite the dominance of Honda and Yamaha, who together control 75-80% of the market, Bajaj has chosen a strategic approach. "We started from the top, deliberately with Dominar 400. We made a choice that we will not go below, because we want to create a brand, a position not just for Dominar, but for Bajaj and the values it stands for," Sharma explains. This premium strategy has paid off, with Bajaj quickly making inroads into Brazil's competitive market.
However, Sharma acknowledges the challenges faced by KTM, a key part of the company's portfolio. "KTM, for various reasons, has got into a debt situation," he shares. Despite this, Bajaj remains committed to KTM's recovery and long-term growth. "We are very keen for KTM to bounce back. It's a great brand, great franchise," he says. Bajaj is working on a solution that goes beyond debt resolution, focusing on creating a management coalition that can steer KTM back to its former glory.
Looking ahead, Bajaj's strategy for further international growth is focused on deepening its presence in established markets while exploring new ones. "We want to now go deeper," Sharma says. "We're successful in places like Brazil, and Mexico is the single largest market for Bajaj Auto in the world." The company's success in Mexico, including pioneering the sports market there and engaging with unique initiatives like all-women's racing teams, underscores its aggressive approach to international expansion.
Riding the Electric Wave
Bajaj Auto has seen a significant surge in its electric vehicle (EV) business over the past year, marking the company's transition toward cleaner mobility solutions. In an industry that is seeing mixed signals—subsidy reductions, rising cost pressures, and evolving consumer sentiment—Bajaj has managed not only to stay competitive but to emerge as a market leader. "There was a major acceleration in our EV business, rising from number five position to number one. That wasn't something which came as a surprise. We were working towards it," he says.
This sharp rise in Bajaj's EV performance comes against the backdrop of a rapidly growing market, especially in two-wheelers. As Sharma explains, "Last year it grew at about 20%. The penetration is obviously cannibalizing ICE scooters more than any other format."
This trend is expected to continue. "I think it's very clear that when a consumer is going to buy a two-wheeler, an electric option is certainly in the consideration set. This more than anything else will continue to ensure that the electric two-wheeler segment keeps growing." Sharma also notes that "it will continue to inch up because at 20% growth, it will be faster than ICE scooters," showing clear momentum in customer preference.
The growth has occurred even as government subsidies have been reduced. Bajaj's strategic pricing and operational efficiency allowed it to absorb some of the impact. "As soon as the subsidies stopped, we absorbed it. Nobody else did it," he adds. The ability to maintain profitability despite reduced incentives reinforces Bajaj's long-term commitment to building a sustainable EV business. "We focus on being a volume leader and a profitable leader. You have to be sustainable, and for that, we look at it as a marathon and not as a sprint," Sharma said.
From a financial standpoint, the EV business is now a major part of Bajaj Auto's domestic revenues. "They are already constituting 25% of our domestic revenues, and I think that will continue to grow. I would say it would probably be a benchmark number. No other company has that kind of numbers. Getting into leadership whilst getting into the green zone is something which was excellent this quarter," he said. Bajaj is focused on scaling further, particularly in the more powerful segment. "Our focus is the top half, and we would like to be at higher than the industry growth," Sharma says.
Beyond scooters, electric three-wheelers are also gaining traction. "On the three-wheeler side also, it's a very healthy growth," he notes, adding that even basic lead acid- based e-rickshaws "fulfill a great need for last-mile mobility in smaller towns and narrow lanes."
However, Bajaj is pushing for better, more robust electric mobility solutions. "There are better solutions over there, and also restrictions which ICE three-wheelers have will ensure that there will be very healthy growth for electric three wheelers in the e-auto format or even in the cargo format," he said.
While Sharma acknowledges that EV growth won't be even across all markets and customer segments, the trajectory remains upward. "The pace of growth will not be linear and not secular. It will be different in different regions across different segments," he said.
Navigating the Entry-Level and Rural Market Dynamics
While electric vehicles and premium segments attract industry headlines, Bajaj Auto remains closely attuned to the nuances of the entry-level two-wheeler market and rural India—both of which are critical to sustaining long-term volume and scale in the Indian auto landscape.
The entry-level motorcycle segment, traditionally the volume backbone for many OEMs, is seeing visible stress. "The absolute entry level is in decline. The 'executive' segment, just above this base tier, is faring slightly better. But as a combination, it's almost flattish," he said.
Instead, the market is gradually moving upward, toward the 125cc segment, he added. This shift is also a reflection of the broader socioeconomic divide and structural affordability challenges. Over the past five years, one consistent trend has stood out despite various market disruptions: the upper half of the two-wheeler industry is growing significantly faster than the bottom half. For instance, motorcycles in the 160cc and below category, which once made up around 55% of the market, now account for roughly 45%. This 10-percentage point shift over 5–7 years is not a short term fluctuation—it reflects a structural and long-term trend of gradual consumer upgrading, Sharma says.
"The top half will continue to grow. With the bottom half, it is an affordability issue. And also prices have gone up, so that is sort of pinching that segment," he explains. Sharma outlines a layered view of income progression in the consumer base: "The very bottom—which is not in the consumption cycle—they are getting helped by all the relief which the government is giving in terms of direct benefits. Then after that, the self-employed and the low-salary-level people, the prosperity has still not reached their pockets. Then there's a level above that; they have started to recover." The rising fortunes of this recovering tier are helping fuel growth in the 125cc+ segment.
According to Sharma, the market will grow by about 6%. "The top half will probably grow at almost twice that rate. On the rural side, which continues to be a major driver of two-wheeler sales, several macroeconomic factors like minimum support prices, good harvesting season, the road network, and retail finance penetration are helping rural markets gain traction," he said.
While the entry-level two-wheeler segment may remain subdued in the short term due to affordability and income disparity, Bajaj is banking on the resilience and rising consumption in rural and small-town India—and the structural growth of the 125cc+ category—to sustain its domestic market momentum.
CNG and Powertrain Plurality
In a mobility landscape shaped by evolving consumer needs, environmental responsibilities, and infrastructure limitations, Bajaj Auto is embracing a multi-fuel strategy to remain relevant across segments. For Sharma, powertrain plurality is not just a tactical move but a long-term necessity. "I think foremost the reason for that plurality and how it will manifest is because of the different use cases which a customer has. There is a constant struggle to balance the aspirations of people and mobility with minimizing environmental issues," he said. This balancing act—between energy security, ecological responsibility, and consumer expectations—is what drives the case for coexistence of ICE, EVs, CNG, and alternate fuels in Bajaj's portfolio.
Among these alternate options, CNG has emerged as a viable and increasingly popular bridge solution—especially with Bajaj's launch of the Freedom motorcycle, India's first CNG powered two-wheeler.
"We are selling about 3,500 to 4,000 units retail per month. Most of it is in those geographies where the CNG network is dense, like Maharashtra, Gujarat, Kerala, and Delhi," he says.
However, Sharma emphasizes that network proximity, not just the number of fuel stations, determines true adoption potential. Early adopters—particularly long distance riders—are already reporting strong satisfaction with Freedom's value proposition. "Most people are long-distance riders. They are the ones who have been the early adopters, and their experience is very good in terms of savings because the promise was 50% saving on the fuel bill, and they are getting it. There's a pride of ownership, ease of operations. So from that point of view, acceptance is good," he adds.
But Sharma also recognizes that crossing the chasm to early majority adoption requires trust-building and ecosystem development. To that end, Bajaj is targeting gig economy cohorts such as delivery partners, who can benefit from the fuel savings of CNG the most but require reassurance on reliability and availability.
"We are working with different stakeholders. For example, aggregators, gig workers, last-mile delivery companies, etc. In the last 6 to 9 months, the government has added 600 more pumps. Now it's gone up from 6,000 to 6,600," he said.
But challenges remain—particularly around fuel pressure inconsistency at filling stations—though these are seen as manageable growing pains. "CNG pressures are a bit erratic in many pumps. So the cylinder doesn't get filled. And if that happens, then they don't get the full range," he said.
In essence, Bajaj's approach isn't about betting on one future—it's about being ready for multiple futures. The company's strategic focus is on building growth platforms and adapting with agility to changing demand patterns to position itself well in navigating the turbulent times and capitalizing on emerging opportunities.