Bajaj Auto may halt EV production amid rare-earth magnet shortage
What's the story
Bajaj Auto, one of India's leading automobile manufacturers, is staring at a potential production halt. The company's Managing Director, Rajiv Bajaj, has expressed concerns over the shortage of rare earth magnets. This issue could severely affect their EV production during the festive season when demand usually peaks. The company had recently dominated both the electric scooter and three-wheeler segments with its Chetak and GoGo models, respectively.
Market impact
August could see 'zero' production
Bajaj highlighted that the shortage of heavy rare earth magnets has hit their operations hard, particularly with high volume requirements for the festive season. In an interview with Shally Seth Mohile, he said, "Our component inventory saw us through until June, but we are down by half in terms of production in the current month." The MD also warned that if this trend continues, August could see zero production for Bajaj Auto's EVs.
Policy uncertainty
'Need greater clarity and policy integrity from the government'
Bajaj also raised concerns over the uncertainty of Indian government policies and delays in state-level EV incentive reimbursements. He said, "I believe that there have been discussions with respect to DVA, PLI, etc., in the context of the import of sub-assemblies/assemblies in place of components." The MD stressed the need for greater clarity and policy integrity from the government to avoid further disruptions.
Market shift
Demand contraction likely in future
Bajaj noted that EVs have a high penetration in the scooter segment, about 25%, compared to just 2% for cars. He warned of a possible demand contraction as consumers who have adapted to electric scooters may not be willing to switch back to internal combustion engine (ICE) products. However, his main concern is for suppliers and dealers who have heavily invested in EV development and production.
Financial strain
Delay in incentives affecting cash flow
Bajaj also highlighted the delay in EV incentives from the Maharashtra government, which has affected their cash flow. He said, "This delay obviously has a significant impact on cash flow, and of course, the state never makes good the loss of interest." The MD warned that if policy integrity fails, it could adversely affect Maharashtra's reputation as a business-friendly state.