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?
Right. Hi Pikshit. So, 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, Pikshit. One, 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 three weeks ago, three or maybe four 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 three to four 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 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. 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 therefore I would like to make a couple of what I believe are very important points, Pikshit. First of all, some of us including myself have been talking about this for years now whenever we meet people in Delhi, ministers, bureaucrats, etc. As is well known, especially after the impact of COVID, the two-wheeler industry has not really recovered and come back even to pre-COVID levels, despite all the effort that everyone has made in all respects. I'm not an expert on cars, but I believe that the same is true especially for the lower half of the pyramid as far as cars is concerned. So as a brilliant fellow called Sah Sankaran said to me very simply, he said 'mhangai is greater than kamayi', so that's been the problem last five years. The common man has been hit very hard by all the inflation around him, while the job market, wage situation, etc., has been very difficult. So I think this context is very important and needs to be kept in mind. Now coming more specifically to your question, I would like to make two very sharp points. Actually, first on the 18% GST, I would like to reiterate that for two wheelers, when you compare with all the other major two-wheeler markets of the world, whether it's Brazil, Thailand, Indonesia, Malaysia, Vietnam, etc., please bear in mind that the corresponding rates there are between 8 and 14%. So on behalf of Indian consumers, I would still say to the authorities that you are not doing them a favor by bringing in 18% in place of 28%. It is still high compared to a median of 12% by as much as 50%. So it's very welcome, it's fabulous, it's fantastic, it'll be great, but it is still on the higher side. And the reason I make this point of it being on the higher side is not to say that I'm not appreciative of it. I'm deeply appreciative. But the point I wish to make is with regard to what you mentioned thereafter about the CC. You see, over 97 or 98% of everything sold in this country is under 350cc. And I personally am of the view that when such policy changes are implemented, we always have the fact that our policies are very complex, outdated, too much legacy, not contemporary, etc. My plea would be that now that we are changing something, please keep it simple. Why not just 18% for everything by excluding products that are above 350cc? By excluding perhaps by volume the last 1% or 2%, I don't know the exact number, and what are we really achieving by doing that? However, there are two very real downsides to doing this because it creates two very big distortions. One is it creates a distortion in the product portfolio of companies. Wherever you draw the line, I have heard about 200cc, 250cc, 350cc, etc. Wherever you draw the line, you are in a way forcing manufacturers to realign their product portfolio, which means to do a lot of work in the area of engine and transmission and indeed the overall vehicle to comply with this norm or this line that you artificially draw. And this work has no value. It is not doing any good to the customer or to the environment or to the employment or to the company. It is only towards the purpose of fulfilling some new arbitrary policy. And the second is it creates a distortion in global alignment. We always say that in so many industries, India is too far low down the value chain. Even China has moved up so much, not to mention some other ASEAN countries. But it all starts with our own attitude as business people or as policy makers. We are dumbing down the customer. We are saying the Indian customer should only buy a 100cc bike or a 150cc bike by making such policies. Why? If he wants a 100cc bike, let him do so affordably and happily, and in turn you will strengthen not just the customer but you will strengthen the companies, you will strengthen Make in India because when you make it more viable for us to make even a 400 or 500cc motorcycle, you make it more viable for the Indian supply chain to develop components for that, you make us more competitive vis-a-vis the rest of the world.
