In a first indication of a thaw in relations between India and China, automaker Bajaj Auto has overcome the global rare earth magnet supply challenge. Chetak deliveries resumed ahead of plan and the festive season. To talk more about this, we have with us Rajiv Bajaj, managing director of Bajaj Auto. Mr. Bajaj, thank you very much for joining us. So you have said that the deliveries of Chetak have begun. This is because of improved supplies and also because you've acquired rare earth magnets from different sources. What is the ability of the company right now to deliver these products and produce them?
So you know I had said sometime in July that given how the situation was then we were looking at possibly a zero month in August as far as both our electric Chetak and our electric three-wheeler the Go was concerned. But I'm now happy to say that the situation has changed very much for the better and we are now hopefully in August looking at 15,000 plus of the Chetak, which would be a little more than half our normal monthly production, and hopefully something in the neighborhood of 7,000 of the electric three-wheeler the Go. So that's for the month of August. But again I must say that's how things stand today based on the availability of magnets as we see them at the moment. And hopefully the situation gets better from here onwards.
Right. The sense that one gets from sources that China after the recent positive interactions between Indian and Chinese foreign ministers, the sense that one gets is that China started lifting restrictions on export of rare earth magnets to India and consignments have started to flow too. What is your sense of the situation?
I'll tell you what our experience is of it, Parikshit. As far as the heavy rare earth or HRE as it is called is concerned, as of now we don't see any movement on that front. And as of day before, when we inquired about this upon hearing what we did in Indian media, at the other end the news from China was that over there nothing has changed as far as HRE is concerned. So maybe it's work in process, but as of now we have heard nothing on HRE. As far as LE is concerned, we started receiving clearance for our shipments from approximately 3 weeks ago, 3 or maybe 4 weeks back, very slowly in the beginning with a lot of testing, a lot of documentation, a lot of delays at laboratories and ports, but this started about 3 to 4 weeks back. So in that sense I would just make the point that it didn't coincide with any visits from India to China or the recent visit from China to India. It's not an automatic outcome of that. This had started before, but what we are seeing now with respect to L or light rare earth is that the slow process of movement is accelerating. So that may seem to suggest that based on these talks there has been some positive impact.
Right, that's an important point. Let me also ask you about the government's plan to reduce GST on two wheelers, four wheelers, and the automobile industry in general. So the 28% slab will become 18% for two wheelers under 350cc. How do you see this move? Is this a positive going forward for Bajaj Auto for the two-wheeler industry?
So this is a very important subject and I would like to make a couple of important points. First, the two-wheeler industry has not recovered to pre-COVID levels despite all efforts. As Saj Sankaran said, 'mangai is greater than kamayi' – the cost of living has outpaced income. Now on the GST reduction: while 18% is welcome, it is still high compared to other major two-wheeler markets where rates are between 8 and 14%. So on behalf of Indian consumers, I would say it is still on the higher side. More importantly, the 350cc cutoff creates two big distortions. First, it forces manufacturers to realign product portfolios to comply with an arbitrary line, adding no value. Second, it dumbs down the customer by implying they should only buy small bikes, which hurts our global competitiveness. My plea is to keep it simple: just 18% for everything, excluding perhaps the top 1-2% by volume. As for the slowdown due to anticipation of the GST cut, there will be a deferment of purchases, but it will come back once the policy is implemented. The sooner the better.
All right. That's an important point. Could you also finally give us a sense of your export pickup, the kind of uptick that you see across segments?
Sure. Last year the second quarter was our best quarter ever, and we are hoping to exceed that this quarter despite some headwinds. We are late with product plans and Chetak due to magnet shortage, but positives include KTM and Triumph doing well, three-wheelers (ICE and EV) where we became market leader, and exports growing over 20%, approaching 200,000 units a month despite Nigeria being down by more than half. Growth is coming from rewarding markets in Latam and Asia like Philippines, Bangladesh, Sri Lanka, Mexico, Colombia, which is good for our top and bottom line.
All right. And one final question before we let you go, sir. What is the kind of EV offtake? You told us that you're looking at about 15,000 scooters in August, 7,000 electric three-wheelers. Going forward, what will be the run rate like?
Well, every day is a new day as far as magnets are concerned. But if supplies come in as I believe they will, we will push hard to achieve new highs. For Chetak, we would push closer to 40,000 units in September. For the electric three-wheeler, we would look to exceed 10,000 units. Already we are the largest EV company in India by volume and revenue across two, three, and four wheelers, and with normalized supply we should take that to the next level next month.
All right. Thank you very much Mr. Bajaj for joining us on the program, giving us your view on the rare earth magnet crisis, the early signs of that easing up, your reaction on GST as well. Let's take a quick break. Up next, we will get you an exclusive conversation with S. N. Subrahmanyan, chairman and managing director at L&T on their overall business outlook.
And let's get to you some exclusive conversation that we have. My colleague Lata Wenadesh caught up with S. N. Subrahmanyan, chairman and managing director at L&T, to talk about how their order activities are shaping up considering global uncertainties and how the company's business momentum is looking as it grows its operations in thermal as well as realty space. Listening to some of the conversation they had.
Our order book today, the backlog of orders to be executed, is more than 6,25,000-6,30,000 crores, which means from an EPC point of view we have more than 2.5 years of work. These are fairly fast-track orders, many to be done in 2.5 to 3 years. So we seem to be on a firm footing. However, due to geopolitical and logistical issues, many projects have components from various parts of the world. Some critical component makers are extremely busy, while others face logistical delays due to the Red Sea Suez Canal issue and other factors. We need to be cautious. The tariffs and wars worry us, but from India and Middle East perspective, we are in a positive situation.
Okay. You gave us a guidance of 10% growth in the order book and 15% growth in topline. That looks very modest because you did so well in the first quarter – 25% growth in order book and 33% in revenue. Would you want to push up the guidance?
No, it's good to be modest. It's always good to under-commit and achieve slightly more. So let's look at it from that perspective.
Will the 10% rise in the order book be more than achieved, or do you think the second and third quarters have a big base? Is there any doubt at all?
We're also growing. It's like a bucket of water – the more you pour, the more you need to fill. To continue growing, we need order inflow and a healthy backlog. With a good backlog, we can analyze orders more carefully, negotiate better terms, and avoid panic. It's a healthy situation.
