Bajaj Auto sees two-wheeler growth at 5% for FY25, trimming earlier expectations

Pune-based motorcycle and three-wheeler maker Bajaj Auto expect two-wheeler sales in India to grow at a cautious 5%, at the lower end of earlier projections of a 5-8% growth for the segment, reflecting slower-than-expected festival season uptake and a decline in sales of entry-level motorcycles. Despite aggressive discounts, entry-level two-wheelers are struggling to gain traction, Rakesh Sharma, executive director, Bajaj Auto, said in a post-earnings conference with the media.

The entry-level segment, despite being targeted with consumer offers and discounts ranging from ₹5,000 to ₹6,000 on models priced around ₹65,000 ex-showroom, has still struggled to regain momentum, Sharma said.

"We are seeing a very clear trend where the entry-level motorcycle market is in decline," Sharma said during the post-earnings call. “The 125cc and above segment, on the other hand, is showing a 5-6% growth. This shift has led to overall two-wheeler growth being relatively flat, at just 1-2%.”

Entry-level market

Sharma noted that the industry's expectations for a post-pandemic rebound in the entry-level market have not materialized. “We were seeing the bottom-half of the market bounce back post-covid, but the last four to six weeks have seen a slight reversal in the trend. The two-wheeler industry was looking at a 5-8% sort of a growth scenario. But we will have to see how things pan out. Some time the (sales) spreads over. I don't see anything fundamentally broken,” he said. 

In contrast, premium motorcycles—those with engine capacities of 125cc and above—are now driving the majority of sales, accounting for around 55% of the market in the second quarter of FY25. The growth in this segment has helped mitigate the impact of weak demand in the lower-end market, though it hasn't fully compensated for the overall slowdown.

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However, Bajaj is betting on its strategy to invest in products at the top-half of the market to continue driving growth. “We have refreshed our Pulsar portfolio and have launched a new Pulsar 125 in New Delhi, which is a very youthful brand with very attractive features and styling should charm the youth. We will continue to drive the Freedom (Bajaj's CNG motorcycle) which gives us a growth platform, irrespective of how the industry is going up or down. So that should help us drive some kind of growth" Sharma said.

The company on Wednesday announced a standalone net profit of ₹2,005 crore for the quarter ending in September, a 9% increase from ₹1,836 crore net profit in the same quarter last year.

It said its revenue from operations stood at ₹13,127 crore, reflecting a 22% rise compared to ₹10,777 crore in the corresponding quarter of the previous financial.

Slow festive season so far

“Festive season sales in the motorcycle industry has been a little bit muted. We thought that 6-8% growth will come in in the festive period. The shraadh period was a decline and we thought Dussehra would be at about 6-8%, but sales on the festival grew only 1-2%, very similar to last year,” Sharma said. He added that the southern and eastern states showed a decline in demand,  while central regions like Uttar Pradesh have performed better. “We will be lucky to see a 3-5% growth for the industry in the festive season,” Sharma said.

Data from the Society of Indian Automobile Manufacturers (Siam) shows that the first half (H1) of FY25 witnessed a 2% decline in two-wheeler volumes.

"It is difficult to pinpoint one macro reason for this slowdown," Sharma explained. "There are various reports about delayed rural incomes, disruption due to elections, and other factors, but it’s clear that demand has been lower than anticipated."

A new Chetak with better margins

Bajaj Auto will also launch a new and upgraded portfolio of its electric scooters under the Chetak brand in November. “You are not going to see something which is very, very different, but it's (the existing product) is being very nicely upgraded and from an external perspective, it will deliver much better performance. From an internal perspective, it will deliver much superior margins for us,” Sharma told Mint.

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In addition to its efforts in the electric vehicle segment, Bajaj Auto is also focusing on the rollout of its CNG-powered motorcycles. The Freedom 125 CNG has received positive market response, with over 10,000 units sold so far. The company plans to ramp up production to meet rising demand, aiming to produce 30,000 units per month from November, with further capacity expansions slated for early next year.