Bajaj Auto stock is at an all-time high. Three-digit has become four-digit and now five-digit.
Rakesh Sharma: Well, that is your perspective. I have got a whole lot of things to attend to. So, this is, not the first thing on my mind when I roll into office.
Happy feeling, right? It is a happy feeling that you cannot deny.
Rakesh Sharma: Of course, of course, for all of us. It is a matter of pride.
And so has been the case with your CNG bike as well. We hear that already two months into it and it is a big hit, Freedom 125. Any numbers you can share with us?
Rakesh Sharma: It has been received very well. What is most delightful is whatever has been designed as the delivery has been almost exactly as per the design. The customers are experiencing significant saving on their fuel bills, they are finding it very convenient and comfortable to ride because of the long seat and the suspension. They are feeling very reassured about the bi-fuel technology which gets them a 300 kilometre plus range.
The toggling between CNG and petrol has been almost friction-free free and on top of all this, the styling is very well appreciated and it is a standout styling. So, on all those parameters, we have been talking to the first thousand customers in-depth and we have received very good feedback from them.
How many?
Rakesh Sharma: In August, we were in about 60% of the addressable market, which means those markets that are served by the CNG network. By September end, we should be covering about 80-85%. So, we should be in about 290, 300 towns that have CNG. Currently, our bookings are almost 15,000 units or so and we are hoping to be able to bill about between anywhere between 17,000 to 20,000 units this month, which is quite a jump from last month.The general perception of the market is that two-wheelers mean rural India, rural India means rainfall and if monsoons are better, rural demand will come back and rural demand comes back, two-wheelers will do well. But that has not been the trend. Rural demand started coming back from April and May onwards and two-wheeler sales have started coming back from the last six months. So, what has changed for a sector that 12-18 months ago was struggling because of domestic demand conditions? You have said that, suddenly there seems to be a complete change in terms of demand and in terms of rural offtake. What has changed?
Rakesh Sharma: I would not like to cleave it between urban and rural. The monsoons have such an impact that not only deep rural, but they affect semi-urban and urban areas also in our kind of segment. Good monsoons have a very uplifting effect right through in our kind of the two-wheeler and three-wheeler customer base. Actually, the origins of this revival are at least two or three quarters ago and I have been saying that fundamentally this revival is sitting on the revival of the economy now reaching the pockets of our kind of customers. 70% of our customers earn a monthly income of about Rs 30,000-40,000 per month and post Covid they were quite battered. Their savings had got hammered and when the post Covid recovery started, it started from the top and by the time it has affected this category of customers, it has taken that much long and that is what fundamentally we are saying. Now, on top of that, a good monsoon releases some optimism, a nice budget which did affect optimism positively to these people. All these things are add-ons, but all this is sitting on the fundamental economic recovery now reaching the bottom of the pyramid.
Also, when we spoke to you last, you said that, you are investing heavily in the EV space and the customer will have the option to choose whether they want ICE, they want CNG or they want EV. For Bajaj Auto, do you think these three platforms – ICE, EV, and CNG – can coexist or ultimately would you take a decisive move this way or that way once which way trends are moving?
Rakesh Sharma: It is a very good question. There have been a lot of shrill pronouncements all over the place about gasoline going to die and not just in India, but in several parts of the world. Our view is that these kind of pronouncements are very self-serving and they ignore the very diverse customers, particularly in India. There are very different use cases. There are some people who want range, there are some people who are not able to charge, there are some people who are overly led by the value or the savings in fuel bill.
Then, there is the whole challenge of the environmental impact and the forex burden from the government side. So, what we think is that there is no one silver bullet which will solve all these problems, both on the government, society and the consumer side. To address these use cases, you will have the coexistence of ICE or let us say gasoline, CNG, and EV. I would say ethanol is also on the horizon . If there is a significant push from the government, which envelopes all the sugar factories, etc, and ropes them into this, then ethanol, which is a very big play in, for example, a country like Brazil, we could see all this combining to solve the issues with the society, the government and the customer are facing.
So, from where we are, we want to maintain our agility to toggle between these fuel systems. And I must tell you one thing, that even today, our three-wheeler business, our three-wheeler dealerships offer LPG, CNG, diesel, petrol, electric, and in due course of time, ethanol; so that is already happening. And then we leave it to the customer to decide, but we want to retain the agility. We do not want to take a position and then try to artificially drive the customer one way or the other.
Like you said, what the fuel of the future is going to be is such a fast-moving variable. You do not know and so many options are there. But at your end and I am specifically talking about the CNG bike right now, what are the plans currently to ramp up your production? Do you see that kind of demand bump up?
Rakesh Sharma: Yes, certainly, we are looking at the demand uptake quite optimistically based on the early feedback. August is the first month where we engaged with the customers in a few more states and that has been very positive. In our case, we are looking at a calibrated expansion because we are conscious about the investments, which not just Bajaj Auto has to make, but even our vendors have to make these investments.
Currently, our capacity is about 20,000. We feel that we should take this up to about 40,000 to 50,000 in the final quarter of this financial year, which is January, February, March. We will continue to monitor. And if it seems that even that capacity is going to run short, then we will take a call by let us say November, December, whether we need to invest in some more capacity so that by the time we are on to the next season, which is next October, we are very fully equipped. So, it is going to be a calibrated expansion, but directionally it is looking like sharply upwards.
Coming to the PM e-Drive scheme, they have a capital outlay of about Rs 10,900 crore, really looking to quicken the EV adoption. How are you looking at the scheme for the industry, and for Bajaj Auto itself? What does it spell out for your EV portfolio as well?
Rakesh Sharma: It is a bold move. For an OE, the most important thing is not the quantum of the support to the customer, but the certainty in the policy, because living quarter-by-quarter, wreaks havoc in terms of making the right kind of decisions, and the whole decision-making process gets distorted.
The government has gone out and said that this is a policy for two years, that signals not just a financial or a commercial certainty, but it also signals very powerfully where the government stands on this, the development of the EV industry, so that is fantastic. The details have not yet come out, but back of the envelope calculations suggest that there is considerable continuity for at least two wheelers and three wheelers, which we monitor closely.
This is certainly going to drive the transition from ICE into EV, it will support that transition, as has been happening. The third thing which I would actually like to call out is that there has been a pretty healthy discussion between the government and the industry through SIAM and there has been a lot of back and forth. In the last six months, where fame II was getting over, there were elections, then there was the Budget, and then the new policy.
These fault lines were navigated brilliantly through EMPS. So, really, a few years ago we would have all been biting our nails about this. But all these significant periods, which could have been very disruptive, were navigated effortlessly because of the EMPS scheme and now we have seamlessly moved into the PM E-Drive, which now combined with the PLI makes a solid case for the transition.
Lastly, the importance of this signalling is that this will create an ecosystem of good EV products and will enable us to advance globally, that is what has happened. Today, the two-wheelers and three-wheelers from India have got a significant global presence and in the EV side, we just have got one key competitor, which is Chinese origin brands having a solid, big domestic market means that we can attack the world markets with a lot of confidence and capability.