Bajaj Auto's Q2 Result Shows Market Share Is Down But EV, CNG Business In Focus

Bajaj Auto Ltd. reported strong quarterly numbers with revenue and Ebitda growing 22% and 24% respectively, with a one-time impairment impacting profitability. Despite this one time hit on standalone numbers, profits grew 9% compared to last year. But the commentary for festival demand for Navratri and Dussehra has been subdued for the industry and much below analyst estimates, with the stock falling in trade on Thursday.

The management focused on the electric and CNG businesses across the two-wheeler and three-wheeler businesses. Both these businesses have blossomed to play a major role in overall sales and financials, with Nuvama anticipating a 20% contribution from EVs and CNG for Bajaj Auto's overall sales volumes.

Here is a look at what the next few years could look like for these businesses.

Bajaj Auto was late to the EV party, but has surely caught up now by becoming the number two player by sales in the electric two-wheeler market. It operates the Chetak brand in the electric scooter segment and launched the lowest priced model, the Chetak 2901 at Rs 96,000, which has helped the company compete with other lower priced competitors.

Even as Ola Electric Mobility Ltd. and TVS Motor Co. cornered 70% market share last year, Bajaj has changed the dynamics with strong market share gains in a very short time. With Ather Energy also having greater focus with new models and variants, its become a four-player market with Hero trying to be the fifth major player.

Bajaj Auto's gross margins fell 130 basis points in the second quarter and brokerages like Citi and Jefferies attribute this to higher sales of EVs. But now, all three of its models in electric two wheelers are PLI compliant which will boost overall margins.

The company also launched its electric three-wheeler in August last year. While it had a 75% market share in ICE or diesel three-wheelers, it recalibrated its electric three-wheeler approach. Despite not being the first mover, Bajaj Auto has now garnered a 35% market share in the segment.  

Nuvama is positive on its electric two and three-wheeler approach. The brokerage said that the company is improving its presence in electric and CNG space. Its building in a 43% CAGR in electric vehicle sales over fiscal 2024–27E.

Motilal Oswal says the company has clearly done everything within its stride to make its CNB motorbike, Freedom 125, both attractive—despite having a CNG tank—and accessible to customers.

Bajaj Auto launched Freedom 125, "the world’s first CNG motorcycle", in August 2024. The initial response has been strong, and the company sold roughly 10,000 units in September. They are anticipating this to increase to 18,000 units in October, on the back of scaling up production and robust demand. Bajaj has guided for increasing production to 30,000 units per month in the third quarter and further increasing production to 40,000 units per month by fourth quarter.

In its post earnings conference call, Bajaj Auto highlighted that three-wheelers had the highest ever volumes in this quarter.

Nuvama is building in their estimate of CNG motorcycles volumes at 80,000 units in fiscal 2025. They expect this to triple by fiscal 2027 to 2,40,000 units.

Electric and CNG vehicles contributed to 44% of the company's domestic revenue. EV portfolio contributed to 20% of overall revenues. The overall EV segment, including both Chetak and three-wheelers, recorded flat Ebitda margins in the second quarter, after accounting for PLI benefits. This indicates that both these segments did not drag the overall margins which is positive,

Currently, the Chetak business remained a drag on overall EV margins even as electric three-wheelers remain highly profitable. This will probably get addressed with the upgraded Chetak—expected to be launched in mid-November—which is likely to improve margins.