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.
