US Tariff Issue Doesn't Impact Bajaj Auto Have Profitable But Very Small Exposure To US: Rajiv Bajaj

Hi Parikhit. Well, I don't know about the industry because every company's situation is specific to itself. For Bajaj, I can tell you in a word that we are quite unconcerned and I'll tell you why. Our exports to the US are basically in two brands: KTM that's about 10,000 vehicles a year and Triumph which is about 5,000 vehicles a year. So firstly it's 15,000 vehicles a year in a volume of about 5 million vehicles. So that's less than half a percent as far as volume is concerned. Nevertheless it's an important market. It's a very profitable market. So it's not a business we would like to lose. And I don't think we are going to lose this business. And I'll tell you why. In any case, from around this time, from August, September onwards, exports to such markets including the US do dip because goods will only reach there by November or so. By which time the winter sets in and demand turns down significantly. So in any case the next 3-4 months are the weakest months as far as exports to such advanced markets are concerned. Which means we have time to rejig the supply chain until almost December or January when we will start again exports for the spring and summer season. And therefore we have many options. Whether we continue exporting from India because there is a rethought on the tariff or whether we go via facilities that are in Europe or in Asia such as Thailand or somewhere in Latin America. There are many possibilities. So frankly we are not impacted significantly and we are not concerned.

Not really, Parikhit. In a word again, or in two, I would say I don't see any impact. Post-COVID, once our export markets started recovering, particularly in Africa and Latin America, exports came back to a level of about 140,000 a month compared to about 200,000 a month pre-COVID. And as you may have seen in recent months, they have come now nicely to a level of 180,000 a month, with an all-round secular recovery and particularly so in LATAM which we are very happy about because again with Pulsers and Dominars it's a very rewarding market for us. Really the single sore point that remains is Nigeria, that used to average 50,000 motorcycles a month and is still hovering around 15-20,000. So with the exception of Nigeria for motorcycles and some markets like Egypt for three-wheelers where three-wheelers are now currently banned, really our export markets have come back strongly and I'm actually quite hopeful that if this trend continues, it may not be long before we are back to that level of 200,000 a month.

Well, that is still a very very uncertain situation. I must say this every day is a new day. Again it's a very company specific situation, Parikhit. For us, as you are aware, in the first quarter of this calendar year the Chetak became the market leader in the electric scooter segment, and in the recent Q1 of this financial year our electric three-wheeler, the GoGo, became the market leader in that segment. So what I'm trying to say here is that our volumes are quite high. We would like to do typically 30,000 Chetak a month and in excess of 10,000 electric three-wheelers a month. So for a high volume player there is a big impact because we don't carry the kind of inventory in number of weeks or months that a low volume player would. And therefore the immediate solution that seems to be working for us now is to get low rare earth (LRE) magnets from China; that has started up. The next step would be to try and source LRE from elsewhere because what if China bans LRE tomorrow then you're back to square one. So where else in the world can we source these from? And finally I think all of us are working towards ferrite magnets or solutions that have no rare earth at all. So I think that is the road map ahead of us.

Yes, of course. You have to incorporate certain changes in fundamentally your motor design to be able to operate at temperatures that are conducive to maintain performance and reliability with low rare earth. So fortunately the R&D has really been working day and night on this for the last several weeks. And they have solutions in place for both the Chetak and the GoGo. Therefore, even as we speak, we are producing now with the low rare earth magnets.