Bajaj Auto plans production cuts amid uncertainties over exports

Multiple people aware of the automaker’s circumspect production plans told ET that Bajaj Auto, which makes Pulsar and KTM bikes, is likely to produce around 250,000-270,000 units in March, compared with average production of 338,000 units in each of the first nine months of FY23.

This could drag down the cumulative capacity utilisation rate at its plants to below 50%. Bajaj Auto has an installed capacity of producing 550,000 units every month.

“Indeed, there is a lot of uncertainty in Nigeria – both civil and economic – on account of elections and demonetisation. So, we have cut our shipments substantively until things settle,” Rakesh Sharma, executive director, Bajaj Auto, told ET.

If Bajaj Auto’s two-wheeler export volume drops by an estimated 100,000 units in March 2023, it would be the lowest overseas shipments for the company since July 2020, when the first lockdown crimped production. Bajaj’s export volume stood at 100,679 units in January 2023 – the lowest in 30 months. Exports have been shrinking for six months in a row, with an average decline 34.4% YoY.

Nigeria faces a note ban, poor economic growth and political uncertainty. The oil-producing West African nation accounts for almost a fourth of Bajaj Auto’s exports. Tepid demand in this key market has prompted Bajaj to moderate production across its plants in Waluj and Pant Nagar, said a person aware of the plans.

The company is looking at three to four months of potentially soft demand in its key international markets, Sharma had said in a recent interview to ET Now. In addition to uncertainties in Nigeria, devaluation and availability of dollars will weigh in on exports, he said. The company’s Waluj plant, which makes the Boxer, CT and Platina models, is likely to cut March production to less than 90,000 units, compared with installed capacity of 225,000 a month.

Economy-bike Boxer accounted for nearly 60% of the company’s total export volumes in the December 2022 quarter; Pulsar accounted for about a sixth. Although exports declined 21% YoY for the first nine months, superior realization of ₹79,768 per unit has mitigated the impact of export revenue decline to 9% at ₹11,742 crore.

Bajaj Auto’s total exports (including commercial vehicles) dropped a quarter to 1.6 million units in the first 10 months of the current fiscal.

This comes on back of a record year of exports – in value and volume terms – in FY22. The Pune-based company is likely to close FY23 with a 20-25 % year-on-year drop in overseas shipment taking the full-year total sales volume to 4.1 million units.