Bajaj Auto Expects Rare Earth Mineral Supply To Resolve In Nine Months, But Q2 Will Be Tough

Bajaj Auto expects the ongoing rare earth metals supply issues to pose a short-term challenge, impacting Q2 production by about 50% for scooters and around 30% for three-wheelers. However, the company is actively working on alternate sourcing and R&D solutions, hoping to fully de-risk the supply chain over the next 6–9 months, Executive Director Rakesh Sharma said on Aug. 9.

Speaking to NDTV Profit, Sharm said: “It is an issue which has got serious short-term implications…We see production getting compromised by about 50% in the scooter segment and about 30% in three-wheeler segment. But we have been working on both alternate sources. I think we should be able to address this in about four months and completely de-risk the supply chain in six to nine months.”

Rare earth minerals are 17 elements which are key production components in several sectors, including auto. The ongoing supply challenges linked to these minerals stem from China’s April move to curb its exports. Notably, the country produces 60% of the global supply and 90% of processed output, which has prompted companies like Bajaj Auto to look at alternative sources.

On the demand side, Sharma acknowledged that the two-wheeler segment is facing a muted response post last year’s festive season. He attributed this trend to a growing concentration of demand during festivals. Additionally, an early and intense monsoon this year disrupted sales in June, slightly dampening Q1 performance, he said.

“But I guess that’s the nature of things, because we are finding that more and more, demand tends to get concentrated during the festive periods. This year, this quarter, of course, there has been a bit of an advancement of the monsoon, which has also been ferocious. But fundamentally, yes, if I put the festive and non-festive periods together, we think that, like last year, this year also should see mid-single-digit 5% to 6% growth in the motorcycle industry,” he added.

Sharma further explained that while a 5 to 6% growth in the large two-wheeler industry isn’t alarming, it still hasn’t returned to the peak levels of FY19.

“One of the contributing reasons is the cost of entry, the cost of the motorcycle, and the price of the motorcycle going up. There have been lots of regulatory requirements….Now, we have to understand that the customer, on average, is someone who makes around Rs 50,000 per month. Even a thousand or two thousand rupee increase has a depressing effect on demand,” Sharma added.

In Q1 FY26, Bajaj Auto reported a 6% year-on-year rise in standalone revenue from operations at Rs 12,584 crore compared to Rs 11,928 crore in Q1 FY25. Ebitda rose 3% to Rs 2,482 crore from Rs 2,415 crore in the same quarter last year. Ebitda margin declined by 50 basis points to 19.7% from 20.2% year-on-year. Profit after tax stood at Rs 2,096 crore, marking a 5% increase over Rs 1,988 crore reported in Q1 FY25. 

On Aug. 8, Bajaj Auto rose 0.13% to Rs 8,240 at 1:49 p.m. on NSE. During this time, the Nifty 50 fell 0.67% to 24,431.75 points.