Bajaj Auto to sustain profit margins while expanding unprofitable EV business

Bajaj Auto, a leading Indian automobile manufacturer, has announced that it will maintain its margins despite ramping up its electric vehicle (EV) business with the Chetak portfolio. In the Q4FY24 earnings conference call, the management stated that operating margins for Bajaj Auto stood at 19.7 percent, marking a significant 180 basis points increase year-on-year.

“We continue to dynamically manage margins across the portfolio as we have done for the last two years. And we continue to scale up Chetak and grow it competitively, while looking to hold margin at the levels we currently are,” said the management.

The improvement in margins was attributed to factors such as price versus cost dynamics, favourable dollar realisation, better product mix, and operating leverage from increased revenue. Despite challenges like high lithium ion pricing and early design-stage issues, the company has managed cost pressures and contained incremental cost drag through R&D-driven cost savings.

However, the management noted that the Production Linked Incentive (PLI) scheme for electric two-wheelers is not expected to immediately lead to profits at the unit level. While it helps offset some costs, Bajaj Auto emphasized the need for further cost-cutting and finding cheaper suppliers to bridge the profitability gap.

In Q4FY24, Bajaj Auto reported a consolidated net profit of Rs 2,011.43 crore, up by 18 percent, with a revenue of Rs 11,249.8 crore, up by 30 percent from the same period last year. The company’s focus on maintaining margins while expanding its EV business showcases its commitment to sustainable growth and profitability in the evolving automotive industry.