How the Global Semiconductor Shortage is Affecting Bajaj Auto's Exports

The global semiconductor shortage is poised to impact Bajaj Auto's export volumes as the automotive industry continues to struggle with the ongoing chip crisis. The shortage, which has persisted for nearly a year, has led to significant production challenges for the company.

Impact on Production

Bajaj Auto, the Pune-based automaker, lost half of its planned production during the July-September quarter of FY22 due to the shortage of semiconductors. The company's domestic volumes in October dropped by 26% compared to the same month last year, falling to 198,738 units. Key models affected by the shortage include the Pulsar, KTM, Husqvarna, and Dominar.

Rakesh Sharma, Executive Director of Bajaj Auto, stated in an interview with Moneycontrol:

"We lost 50 percent of Pulsar, KTM, Husqvarna, and Dominar volumes due to the shortage of semiconductors (in Q2FY22). But has this shortage resulted in exactly that many sales loss numbers? I don’t think so."

Dismal Demand Environment

The demand for two-wheelers has remained sluggish over recent months. Despite the festive season, sales continued to be weak. According to data from the Society of Indian Automobile Manufacturers (SIAM), two-wheeler wholesale volumes saw 9% growth during the April-September period, although this data is not strictly comparable to last year due to the impact of lockdowns.

Two-wheeler manufacturers have observed that rural demand remains low, and urban demand has been slower than expected. The rise in prices—about 30-35% over the past year—combined with the economic effects of the COVID-19 lockdowns, has further dampened consumer demand.
Sharma noted the potential impact on international markets, adding:

“In overseas markets, we are going to see the loss in numbers for one or two months because of the long supply chain. We will begin to see the loss in retail in overseas markets because stocks are running out in November, December, and January.”

Why Exports Matter for Bajaj Auto

Exports are a critical part of Bajaj Auto's business strategy. More than half of the company's production is sold in international markets. Between April and October FY22, Bajaj Auto exported 1.29 million units, representing 56% of its total two-wheeler sales. The company’s export destinations span 79 countries, including markets in Latin America, Africa, Asia, the Middle East, ASEAN, and Europe.

Chip Availability and Future Outlook

When asked about the improvement in semiconductor availability, Sharma stated:

“The situation is dynamic. It might appear that supplies are improving, and then suddenly, the problem reappears. That is why we feel it is uncertain. Companies like Tesla are setting up huge capacities and soaking up semiconductor supplies. This has had a ripple effect on us. So, this up and down in supplies will continue for some time.”

As the chip shortage continues to affect the automotive industry globally, Bajaj Auto is expected to face challenges in maintaining its export volumes in the near future.