Bajaj Auto to Expand Manufacturing Capacity by Over 25%

Bajaj Auto plans to increase its annual manufacturing capacity by more than 25% progressively over the coming quarters as it looks to meet rising demand for electric vehicles, premium motorcycles and exports. The company’s management says capacity constraints currently limit its production.

The two- and three-wheeler automaker will expand its overall manufacturing capacity from around 7 million units to more than 9 million units, Joint Managing Director Rakesh Sharma told reporters after announcing the company's first-quarter results.

"Supply chain disruptions will hopefully ease off, but we have faced capacity constraints and we are undertaking a major capacity expansion. We have our capacity, all the businesses put together, around 7 million units and progressively over the next few quarters, we will increase it to 9 million or over 9 million, so almost a 25% expansion," Sharma said. 

He said the expansion was driven by strong export demand, rapid growth in electric vehicles and capacity shortages in certain internal combustion engine models and premium motorcycles.

"...in recognition of the strong export demand, the galloping EV demand and also certain models in cellular ICE where we have faced constraints and the high-end bikes. All of these challenged capacity in the last quarter and the expansion is being undertaken," he said.

He noted that the company is yet to finalise the location for the capacity expansion, with multiple options under evaluation. He indicated that the expansion would involve a combination of brownfield additions at existing facilities and a greenfield plant, but declined to disclose the planned capital expenditure. 

Meanwhile, Sharma said production was constrained during the quarter as supply chain disruptions affected the availability of components.

He said the company lost about 10-15% of potential production because of disruptions related to logistics, manpower and the availability of gas, adding that output could have crossed 1.5 million units under normal conditions.

When asked about factory utilisation, Sharma said capacity constraints varied across products and could not be expressed as a single utilisation figure.

The additional capacity will primarily support electric two-wheelers, electric three-wheelers, high-end motorcycles and some internal combustion engine three-wheeler models, he said.

Sharma noted that the expansion would also require suppliers to increase capacity alongside Bajaj Auto's manufacturing facilities.