Chip Supply Constraints Led To 'Serious Shortfalls' In Q4, Says Bajaj Auto

Bajaj Auto Ltd.'s vehicle sales fell as the industry continued to face global supply-chain constraints leading to "serious shortfalls" in the last quarter of FY22, according to Bajaj Auto's Rakesh Sharma.

Semiconductor shortage is a major issue faced by the company, and the impact of supply chain constraints have extended to the first quarter of the current fiscal "impacting 15-20% of the normal plan", the executive director at the maker of Chetak told BloombergQuint during a post-earnings press conference.

The two-wheeler maker had "single source dependencies" that led to a shortage of supplies. However, the company is now developing alternative sources of supply, Sharma said.

Bajaj Auto’s overall sales rose 8% over the previous fiscal in FY22, aided by exports that jumped 22% to 25.06 lakh units. However, its domestic sales fell 6% to 18.01 lakh units.

In the fourth quarter, the company sold 3.89 lakh units in the domestic markets, 27% lower than a year earlier. Exports also fell 8% during the quarter.

"The three-wheeler business continues to grow every quarter," Sharma said. "The drive by the Indian government to expand CNG footprint across the country is very helpful."

It has resulted in strong market share for the business aided by auto finance, Sharma said.

"In retail, the company has gained 1.8% market share."

The post-Covid-19 economic recovery in not evenly spread among different income groups, said Sharma.

The low-income group with monthly income of up to Rs 40,000, which makes up for the largest portion of Bajaj Auto's consumer segment, has further weakened amid the pandemic and impacted sales of the company, he said.

However, Sharma expects retail finance and fintechs to support the recovery. And the marriage season in April and May may also boost demand, he said.

Despite facing supply constraints, Bajaj Auto's wholly owned subsidiary Chetak Technology Ltd. is set to begin production of electric scooters in June.

Bajaj Auto's first electric scooter, the Chetak, that was launched in January 2020, has crossed cumulative demand of 10,000 and is now present across 20 cities, Sharma said. "Chetak is my aspirational product. Furious work is going on to expand the portfolio of Chetak."

The company has a large order book of over 15,000 for electric vehicles, Sharma said.

Despite reports of electric scooters catching fire, Sharma said such incidents will "not fracture the demand" for EVs.

"We take a cautious approach in putting out our product. There are temptations to extract more from the batteries than what they are capable of. We resist those temptations."