Bajaj Auto Limited (BAJAJAUTO) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to Q1 FY 2027 Results Conference Call of Bajaj Auto Limited. My name is Nirav, and I will be your coordinator. [Operator Instructions] Please note that this conference is being recorded. I'll hand the conference over to Mr. Anand Newar, Investor Relations from Bajaj Auto Limited. Thank you, and over to you, Mr. Newar.

Thank you, Nirav. Good evening, everyone, and thank you for joining us for the call today. Welcome to Bajaj Auto's Q1 FY '27 earnings call. On today's call, we have with us Mr. Rakesh Sharma, Joint Managing Director; and Mr. Dinesh Thapar, Chief Financial Officer. We will begin our call with the opening remarks from Rakesh from the business and operational performance for the quarter, followed by Dinesh, who will take us through the financial highlights. We will then open the forum for Q&A. Thank you. Over to you, sir.

Thank you, Anand. Good evening, ladies and gentlemen, and welcome. Thank you all for joining in. So quarter 1 has built further on the record-breaking financial year '26 by delivering the highest quarterly performance across all parameters. Volumes at 1.4 million, revenue of INR 17,000 crores, EBITDA of INR 3,500 crores and PAT of INR 3,000 crores, along with EBITDA margins of 20.9%. I think all of these results beat most of your estimates. It was a tough quarter with [indiscernible] supply chain and logistics [indiscernible] as well as a ransomware attack, which you may have read about, but it was defended comprehensively and successfully. Though exercising abundant caution, we suspended operations for a few days to complete all the checks and investigations. All these above issues combined impaired availabilities by about 10% to 15%, more so in exports, high-end bikes and EVs. But for these disruptions, these business areas would have recorded an even better performance. And I would say that we were looking at crossing 1.5 million units this quarter, which got sort of hampered because of these issues. While all the BUs delivered handsome growth, I would like to call out the super performance of exports and EVs. Taken together, our electric 2-wheeler and 3-wheeler businesses delivered their largest ever quarter and are now at 30% of domestic revenues with double-digit EBITDA percentage. Electric mobility is a meaningful contributor to the company growth and profitability, opening up new segments, both in domestic and overseas markets. Let's get to the business units now. Exports business unit, the business unit established a new high of 732,000 units in the quarter and [ INR 5,735,000 ] revenue in the quarter. The BU accounts for 40% of Bajaj Auto by revenue. Of the top 30 markets, which account for almost 80% of the industry, we continue to significantly outpace the industry growth by [ almost ] 2x, thereby increasing our market share very strongly in these important markets. Notably, exports growth was not just faster than the industry, but was broad-based across all the regions, except MENA, the Middle East and North Africa, for obvious reasons, and was achieving superior price positions than compared to Q4. African markets did very well, growing by almost 50% and we grew by twice that rate. We doubled our retail in Africa, led by the new introduction last year of the upgrade of the [ Boxer 125 ], which is now called [ Boxer 125 Heavy Duty ]. Nigeria led the growth, being in a pre-election phase, which increases institutional sales. By our estimates, a disproportionate share of this expansion was captured by us, doubling retail year-on-year and delivering a market share of almost 60% in retail terms. The solid franchise of the Boxer brand and a wide footprint of retail and service network powered the performance. Latin American markets also [indiscernible] albeit at a slower pace than before. And hereto, performance was way, way above the industry, particularly in Mexico, which is the largest market in that. The combination of the success of our high-end models, NS series, the [ N250s], et cetera, a well-organized supply chain in Mexico, which gets the best tariffs at 3% and a wide distribution network continue to strengthen the competitive position in this key market, which is now among the top 5 markets of the world. Retail in Brazil dropped 50% plus growth, but a very healthy financial performance in the subsidiary. Our store count stands at 75-plus stores, and it continues to be expanded. The entire Latin American region is a very strong driver of not just our export performance in terms of volume and revenue, but also of corporate EBITDA now. The Asian industry was muted due to underperformance in the countries of Bangladesh and Nepal. And our objective was to protect market share and keep the dealer network strength. A series of launches were made in Philippines, along with establishment of exclusive motorcycle stores to serve the high-end motorcycle customer as part of our strategic thrust to build the personal motorcycle [indiscernible] person motorcycling category over there through these new products and new stores. Premium motorcycle exports from India have revived after the disruption of past several quarters. In quarter 1, KTM exports from India grew by 20% plus, while the Triumph brand exports grew by 40% year-on-year. [indiscernible] exports delivered a record of 100,000 units, growing by almost 70%, commanding a dominant market share of over 65% of 3-wheeler exports from India, and our growth of secular across regions in mature as well as nascent markets. Overall, the exports business, which like I said is 40% of our revenue, has established an outstanding growth momentum and are looking at moving exports to beyond the 250,000 per month level this quarter and onwards. And as you will recall, we were, just a few quarters earlier, trying to knock at 200,000. Domestic 2-wheelers, to capture some synergies, we have brought our 2-wheeler business in the umbrella of the 2-wheeler business unit. The 2-wheeler industry turned in a resilient performance as registrations grew by 14% year-on-year in quarter 1. Though much lower than the 25% growth of quarter 4, but under the circumstances, a very healthy performance. This growth was driven by EV scooters and the 150 to 400cc segment of motorcycles. The 100cc and 125cc segments were flattish, resulting in a motorcycle growth in the industry of 7%. So the industry is really -- the 2-wheeler industry is really being driven by EV scooter, the 150-plus segment. This BU now accounts for 25%, the motorcycle -- Bajaj motorcycles account for 25% of our revenue. Here, we continue to witness faster than industry growth in the 150cc-plus segment on the back of new variants. I would just break down the domestic motorcycle business into the turnaround program, which we have launched. This is an exercise we had commenced post festive in November in Q3 last year. It was a program to address end-of-cycle fatigue being faced by parts of the portfolio. The reinvigoration of the 150cc segment was prioritized first. This has resulted in sales outperforming the industry by 1.5x in this segment despite some elements of the old portfolio still being a drag. The performance has been secular across all states. All states, I think barring 1, have shown growth with the new models of the NS series, which are now contributing almost 60% of our sales in the 150cc-plus segment, signaling a healthy acceptance of the refreshed portfolio. Consequently, we have seen on the basis of an expansion in market share of a couple of percentage points in the last 5 months. Going forward, we will complete this exercise for the 150cc segment by the introduction of an absolutely new 150cc under the Pulsar brand and 10 facelifts in the 160 to 400cc rate with class-leading features and superior engine performance. The next focus is the 125cc segment where, again, an absolutely new 125cc will be introduced in the Pulsar brand, along with a couple of new upgrades. Our aim is to accomplish this exhaustive portfolio makeover within the next 6 weeks. So by the time we meet next in October, we should be able to give you some early reports of their acceptance. Further, in the year, we aim to introduce 2 new brands in the 125cc segment to cover the full spectrum of customers in this large segment as well as proposition customers from the 100cc segment to upgrade. In pro biking comprising the KTM and Triumph brands, the business continued its accelerated growth trajectory during the quarter. Together, KTM and Triumph delivered another record performance with combined domestic volumes of nearly 40,000 motorcycles, growing more than 50% year-on-year. KTM performance was strong across both the Adventure and Duke portfolios, with the Adventure range delivering another record quarter. Triumph maintained healthy momentum with the recently launched Tracker 400 with styling inspired from flat track racing. Together, Triumph and KTM -- sorry. Together with KTM Adventure and TriumpH Scrambler, we now lead the adventure category in India. Customer engagement were rigorous in both brands through initiatives like the KTM Moto Carnival, Duke's Track Experience, the World of Triumph and the Distinguished Gentleman's Ride, all of which were very well received. The rollout of the joint KTM and Triumph stores to expand reach while ensuring store viability is progressing steadily with now almost 90 outlets operational. [ Chetak ], electric scooter volumes continue to scale rapidly in -- with 65% year-on-year growth, driving EV penetration to almost 25% of ICE scooters at an all-India level. And in some states, actually going beyond 50% already. Within this environment, Chetak outperformed the industry, growing nearly 80% year-on-year and delivering its highest ever quarter in terms of volumes, revenues and profitability. The newly launched [ Agile ] and Light Chetak 2501, aimed at the younger buyer, continued to do well and now constitutes almost 12% of the 5-model portfolio under the Chetak brand. Demand, however, continued to remain ahead of our ability to supply. Capacity expansion has been undertaken, with an immediate and medium-term focus to enable us to better serve the growing market. The reach of Chetak today stands at over 530 exclusive stores, supported by a wider network -- wide network of 4,500 customer touch points across more than 850 cities. As capacity improves, we expect to support not only domestic growth, but also accelerate our international expansion. So the domestic 2-wheelers, which account, together with KTM, Triumph, Chetak, Pulsar, Dominar and [ Platina ] brands, they account for about 40% of our revenues. And collectively and driven by the outstanding performance of the 150cc motorcycles, KTM motorcycles, Triumph motorcycles and Chetak, I can safely say we were the fastest-growing 2-wheeler in quarter 1. In commercial vehicles, the 3-wheeler industry, including e-ricks, grew by 11% year-on-year, driven by a doubling of sales of autos which now constitute 44% of the L5 segment. Q1 saw our highest ever billings and retail performance. The ICE franchise remains rock-solid with a market share of about 70%, and leadership position in EV was maintained. In the L3 or the e-ricks segment, our newly introduced Riki is progressing steadily with presence now in nearly 150 cities. Our focus is to upgrade customers through superior quality, reliability and ownership experience as we see the category has a good expansion opportunity with a very, very specific use case. With a 12-model portfolio in electric 3-wheelers, we possess the widest portfolio from the smallest to the largest vehicles with the longest range covering the full spectrum of use cases in passenger as well as cargo. Interestingly, demand has been robust on the ICE side too, particularly in exports. The 3-wheeler development in multiple markets is driving growth. Capacity issues, restricted sales of some models, both in India and overseas. The spares business maintained its run rate of INR 1,700-plus crores in quarter 1 too, whilst delivering record margins. In closing, Q1 was a volatile quarter, but was successfully navigated. The supply chain disruption should be easing off in Q2, which should help grow the top line, and the weakness of the Indian rupee will hopefully be helpful in mitigating cost increases. But inflation and international logistics will need to be managed closely. Having said that, the demand environment, both in domestic and international, particularly in our key markets, is very positive, though the business environment may still be a bit volatile. However, putting all together, the outlook is promising. Capacities have emerged as a key constraint to growth, so with an eye on the future, we are undertaking an expansion of capacity by almost 25% from the current 7 million units per annum across different businesses to progressively go up to 9 million units per annum. The key areas to address will be EVs, both 2-wheelers and 3-wheelers, high-end motorcycles and 3-wheelers. In conclusion, through Q2 and the rest of FY '27, our focus will remain on the 7 key areas: domestic motorcycles, achieving a superior competitive position and growth in the 125cc-plus segment by leveraging the imminent total portfolio makeover. Exports should pass the 250,000 per month level on the back of leadership in sports segment of LatAm and a more aggressive share gain in commercial bikes in Africa, again, on the basis of the growing success of the Boxer 125 Heavy Duty. Super premium sports segment, accelerated growth in both Triumph and KTM business network expansion and investment in niche segment development like adventure and sport. In electric business, capture share of the rapid industry growth in both 2-wheelers and 3 wheelers. Certainly, capacity management and maximization of availability will be attracting a lot of management attention. In KTM AG, continue to support the management in the turnaround underway, bringing KTM AG back to its normative levels. And finally, BACL, we will continue to build capability in BACL and continue to deliver class-leading performance out there. With that, let me hand the session over to Dinesh.

Thank you, Rakesh. Good evening, everyone, and thank you for joining us on this call. You've just heard from Rakesh that the company delivered its best ever quarterly performance on revenue and profit, underpinned by record volumes. This growth has been broad-based with all our businesses, domestic motorcycles, domestic 3-wheelers, electric two-wheelers and exports all contributing meaningfully to deliver this performance. And when you look at every cut of the business, whether it's ICE or EV, 2-wheelers or 3-wheelers, and domestic or exports, all delivering double-digit growth. Before I get into the financial performance, let me spend a few minutes on what has truly been a very significant factor of this quarter: the very volatile operating environment. On commodity inflation, as many of you would recall, when we last met in May, I had indicated that the operating environment had turned sharply inflationary, and we were estimating commodity inflation to be in the range of 3.5% to 4%. We had also then spoken about having taken pricing actions to offset about 40% of that impact while continuing to watch the situation closely and dynamically as the quarter progressed. Through the quarter, commodity inflation intensified even further. Inflation across the metals complex accelerated meaningfully through May, taking the overall inflationary impact for the quarter to about 4.5% of revenue. It was clearly a hyperinflationary commodity environment with virtually the entire basket witnessing sharp increases. Steel rose by upwards of 10%, aluminum and platinum by nearly 40%, rhodium as well by 4%, while ABS, copper, nickel and natural rubber also moved up quite substantially through the quarter. In fact, as the quarter progressed, we also started to witness inflation building up across proprietary components, electronics, energy, logistics and labor costs, resulting in higher overall conversion costs as well. Now as many of you would appreciate, those of you who've been in this industry for a long time, we've rarely witnessed commodity inflation of this order of magnitude compressed into such a short period of time. To put this in perspective, the commodity inflation we absorbed in this single quarter was greater than the totality of the inflation that we've experienced over the previous 2 financial years put together. That I believe gives you a sense of the sheer and density and enormity of the issue that we were faced with on the cost environment. That said, we also responded decisively. And as I'd indicated in the previous call, we responded with calibrated pricing very judiciously taken through April and June, enabling us to offset nearly about half of the inflation through pricing. The balance on margin was absorbed through a host of factors, notably dollar realization and discretionary cost rationalization that I'll talk about as we get into the financials. The second defining feature of the quarter was the series of supply chain and network disruptions that emerged across multiple fronts, making the operating environment considerably more complex than what we've typically experienced. While none of these challenges in isolation would have materially impacted the business, this simultaneous occurrence required a very high degree of rational agility and execution across the organization. To start with, fuel availability became a significant challenge early on in the quarter following the curtailment of industrial LPG supplies. This necessitated a rapid reconfiguration of our energy consumption pattern across both our own operations as well as the wider vendor ecosystem. And accelerated efforts were taken to optimize fuel consumption and increased dependence on alternate energy sources, namely PNG and electric, all while ensuring their production schedules by and large, remain unaffected. At the same time, geopolitical developments in West Asia led to force majeure declarations by certain global suppliers and disrupted maritime logistics, resulting in tightness across key raw materials, particularly aluminum alloys and polymers. Our procurement teams responded swiftly by onboarding multiple alternate sources, both domestic as well as global, and thereby ensuring continuity of supplies despite a very fluid sourcing environment. We also experienced localized manpower availability challenges during parts of the quarter, driven by higher cost of living arising from spiraling LPG costs and workforce migration due to elections. The seasonal effect of this factor aside, the level of labor shortage was exceptionally pronounced this year and particularly stifled production in the months of April and May. Across each of these situations, our teams acted with remarkable speed and coordination to minimize the impact on the business. While these disruptions did constrain our ability to fully service demand and resulted in some loss of production opportunities of about 10% of volume during the quarter, the business still delivered record volumes and financial performance. It is therefore fair to say that had it not been for these external supply shocks and constraints, both our volumes and financial outcomes as reported externally would have been even stronger. Currency. On the currency front, the story continued to remain distinctly favorable. The rupee [ depreciation ] provided an important and welcome cushion to manage the very sharp and significant impact of an exceptionally inflationary quarter. As I mentioned, over the last few quarters, this has been a structural advantage for the business here. Given the strength and diversity of our portfolio with exports now accounting for nearly 40%, 45% of the business. The rupee depreciated through Q1, with a realized USD/INR rate coming in at 94.4 versus 90.6 in the previous quarter and 85.6 in the same quarter last year. Turning now to the financial performance. Building on the momentum we have seen over the last few quarters, the business delivered yet another record quarter with volumes, revenues and profits scaling new highs. On revenue, volumes reached an all-time high of over 1.4 million units, a growth of 29% year-on-year, while revenue from operations crossed the INR 17,000 crore mark for the very first time, coming in at INR 17,244 crores, representing a robust 37% year-on-year growth. What I find noteworthy about this performance is that you will have noticed virtually every operating lever of the business has contributed to this top line. Volume remained the single largest driver with the business delivering strong sales growth across both domestic and export markets. Pricing, as I discussed earlier, was implemented in a calibrated manner through April and June to recover a significant portion of the unprecedented commodity inflation. Currency continued to provide an important cushion against the elevated cost environment and mix remains structurally favorable. The continued strength of commercial vehicles premium motorcycles exports and the steadily increasing contribution of electric vehicles all enhanced the buildup of our revenues. In addition, spares revenue was at a steady range of between INR 1,700 crores to INR 1,800 crores, providing a recurring support to overall revenues and profitability. On EBITDA, the quarter came in at INR 3,596 crores, again, an all-time high, with a strong 45% year-on-year growth. EBITDA margins inched up to 20.9%, an improvement of 10 basis points sequentially despite the hyperinflationary commodity environment that I'd spoken about. If the revenue story was all about all 4 levers of growth coming together: volume, pricing, currency and mix, the profitability story was even more compelling. While revenues grew 37%, EBITDA grew by 45% and the ability of the business to convert strong top line growth into higher earnings despite operating in an extremely volatile and challenging environment. I believe it's the hallmark of this quarter's performance. As I had mentioned quite categorically during our last interaction in May, that in an environment such as this one, one had to be extremely disciplined on cost, particularly discretionary spending. And I'm pleased to say that as an organization, we responded exactly in that manner. So over and above the revenue drivers, higher volumes translated into meaningful operating leverage and the EV business continued to improve its profitability, driven by scale and value engineering. And the organization remains intensely focused on sourcing efficiencies and prudent control and questions over discretionary expenditure. To sum it up, the sequential margin expansion was primarily supported by higher realizations and a richer mix, that you will see reflected on the GM gross margin line, which reduced the extent of the severe commodity inflation, which was then made up by operating leverage arising from higher volumes and disciplined cost management across the organization that you will see reflected on the other expenses line. Together these factors more than offset the challenges on input cost inflation even after the pricing actions were taken through the quarter. On a year-on-year basis, margins improved by 110 basis points, primarily driven by favorable currency movements and improved operating leverage, which more than offset the adverse cost versus price dynamics. All of this flowed through to the bottom line as well with profit after tax being a tad under INR 3,000 crores, again, a new high for the company and up 42% year-on-year. Quickly a word on cash. The company continued to generate free cash flow during the quarter, reflecting the underlying quality of earnings and robust cash conversion. We generated over INR 2,300 crores of free cash flow during this quarter, almost double that of the same period last year, translating into a cash conversion of almost 80% of profit after tax. The balance sheet continues to remain very healthy with surplus cash in excess of INR 20,000 crores at the end of the June quarter, well managed and providing sufficient fuel for future growth investments, strategic opportunities and improved shareholder returns. Before I move to the consolidated numbers, let me make one point upfront for your attention. The year-on-year comparison this quarter on our consolidated results is not entirely comparable, not like-for-like, as it includes the consolidation of a full quarter of Bajaj Mobility AG's results through our Netherlands subsidiary, [ BHPV ], which was not part of the base quarter. You will recall that we had started to consolidate Bajaj Mobility's results the last quarter, but the last quarter did not have a full quarter's numbers. This was the first time that the consolidated numbers has a full quarter of Bajaj Mobility's numbers in the current one. Having said that, for those of you who've been following the underlying businesses over the last few quarters, I think the direction of travel is becoming increasingly evident. The contribution from our subsidiaries is increasingly and steadily becoming more meaningful as each of these businesses continues to gain scale and significance. On a consolidated basis, stand-alone revenues of INR 17,200 crores translated into consolidated revenues of INR 21,689 crores, reflecting a 65% year-on-year growth, while consolidated profit after tax came in at INR 3,226 crores for the quarter, up 46% year-on-year. This quarter, the stronger consolidated growth was driven by the solid performance of Bajaj Auto credit limit, which I will talk about in a bit, the steady expansion of our Brazilian subsidiary and the consolidation of a full quarter's results of Bajaj Mobility AG. Let me now spend a quick minute on KTM and BACL. On KTM, as you are aware, this is the first full quarter of line-by-line consolidation, and therefore, certain aspects of comparability will naturally normalize over the coming quarters, and we will speak more on it as we progress with each one. On the operational front, the turnaround continues to progress in line with the road map we had outlined internally compared to the period last year in production had virtually come to a standstill during the restructuring process. Manufacturing has now progressively ramped up through the year and is approaching underlying retail demand. Billing performance has improved in line with this recovery. At the same time, the planned normalization of dealer and plant inventories has largely been completed, with inventory levels now stabilizing at the desired levels across the broader system. We are also seeing the benefits of tighter cost control on fixed costs and other overheads, and these improvements are now becoming evident in the financial performance. These indices remain an important focus area as we continue to execute the turnaround in a calibrated manner. I know that many of you are already in touch with the management team of KTM and would therefore have access to the public disclosures and updates, including the recent ones made by BMAG, where many of these details can be tracked. That said, from our side, Anand and the Investor Relations team will, of course, be happy to provide any further details in clarity that you may need. On BACL, it continues to scale at a very healthy pace and delivered yet another quarter of very strong performance. Total income crossed INR 1,100 crores, while profit after tax for the quarter came in at INR 227 crores, more than doubling the same time over last year. To give you a sense of the scale of business, assets under management have now hit the INR 20,000 crore mark, representing a growth of over 70% year-on-year. The capital adequacy ratio remained healthy at 19%, while the business continues to deliver an industry-leading return on equity of over 25% as of June 2026. Similarly, BACL's financial results press release and other regulatory disclosures are available in the public domain by virtue of its [ CP and NCD ] listings. So for those of you who would like to explore the performance in greater detail, that is now out there. Let me close with a brief outlook. As we look ahead, the operating environment continues to remain extremely volatile, complex and uncertain. One important change that we have observed as the quarter has progressed -- the first quarter progressed is that inflation is no longer confined to the base metals complex. The cost pressures have become more broader, with proprietary components, electronic, electrical parts, labor, logistics and LNG and conversion now moving up simultaneously and meaningfully. While the business experienced only a part of this broader cost inflation during the first quarter, the second quarter is likely to reflect its impact over the full period. At this stage, however, it would be premature to put a precise number around the inflationary impact given the many moving parts. The environment continues to evolve almost on a weekly basis and remains heavily influenced by global developments and events and -- geopolitical events. Consequently, any estimate that we provide today could look very different in a few weeks from now. As always, we will continue to respond dynamically. Pricing remains one lever, but not the only one. We will continue to focus on value engineering, sourcing initiatives, productivity and disciplined cost management, while closely monitoring the currency environment, which has provided an important cushion over the past several quarters. After that, support continues will naturally depend on how the rupee evolves over the coming months in the context of the initiatives and measures announced by [ RBI ]. Our approach, however, remains unchanged. We will continue to protect the competitiveness of the business. We remain very disciplined on costs, invest behind strategic priorities and respond with agility as the external environment evolves. With that, let me hand the call back to Anand and open up the floor for questions.

Thank you. Nirav, with this, we can open the floor for Q&A.

[Operator Instructions] First question is from the line of Kapil Singh from Nomura.

My first question is on the demand side. You mentioned that demand in the premium segment remains strong, but we haven't seen that kind of traction in the below 125cc segments. And this is despite support coming in from the GST cut. So is it the customer preference or -- that is changing very rapidly? Or is it that the customer in that segment itself is facing some kind of stress? Also related to this, is there a shift also happening from ICE to EVs? And if so, from which segment?

Yes. Thanks. The GST cut, as you remember, effected on 22nd September last year drove -- unleashed a very, very high level of growth, which continued beyond the festive in quarter 3, in quarter 4. Like I said, to quarter 4, 100 registrations in motorcycles, where, I mean, the growth was about 23% odd. So that's a very, very high level of growth. Consequently, what has happened is that there has been inflation through pricing. And then, of course, there was the West Asia crisis, which brought the difficulties of LPG availability into every kitchen of India and just -- and affected consumer sentiment. And to some extent, I would say that the impact on different segments was different. And this actually reflects the structure of Indian economy and what the Indian economy is perhaps going through in the sense that the upper half of the society are economically much, much stronger and the people down the pyramid have weakened. And this is getting reflected in the way the segments are growing. Therefore, even when we see the motorcycle growth dropping from 23% or 24% to 8%, 9%, the 150cc, the 250cc segments, they are growing at 20% plus. But the 100cc segment and also the 125cc now are actually growing at low single-digit numbers. So that is the nature of the growth. It's all coming together, as you know, a 14% growth for 2-wheelers and I would say a 7%, 8% growth in quarter 1 for motorcycles. This obviously includes EV. EV, of course, had an outstanding growth, EV 2-wheelers, of almost 70%. And it's not difficult to explain this because, as always, a large part of the EV market is driven by operating economics. And I remember 2020, 2021 when the progression was slow. There was a point of inflection when the petrol prices had crossed INR 100 a liter, and suddenly we saw demand for EV going up. Now because of the West Asia prices and the impact on petrol, and generally on people feeling that the fuel bill might just go out of their control, there has been a surge in adoption of electric vehicles. And that's why even in this environment, when overall -- when motorcycle is going at 8% kind of a number, the EV growth is 67%. Now it's cannibalizing -- the most obvious answer to that is it's cannibalizing ICE scooters based on -- also on anecdotal surveys, which we do about other vehicles which people were considering to buy, so -- and the nature of the EV functionality, which is rather not as strong in delivery of range as motorcycles, but very similar to scooters on a full fuel tank. The cannibalization is obviously impacting scooters -- ICE scooters more than any other category.

Second, just a quick one on the EVs. What is the capacity expansion plan for both 2-wheeler and 3-wheeler EVs? And where are we on productivity now?

So we are now at 50,000 units. We are limited at that for EV 2-wheelers. And immediately through some productivity measures, both at our end and with the vendors, we hope to unlock it at 60,000. But you can well imagine that we are very enthused by the very promising outlook of this industry. And the fact that we were out of scooters from 2007 onwards, as you know, so we came into scooters, forget the powertrain, whether ICE or electric, but we came into scooters only in 2020 via electric Chetak, and have captured 23%, 24% market share, sometimes #1, right now at #2, but very, very close to leadership. So both from an industry growth as well as our competitive position point of view, we are very optimistic, and we are going to unlock more capacity in this. Similarly, in 3-wheelers, not just in electric but in ICE models also, we are experiencing constraints. Our electric vehicle [ 7012 ] has been a runaway success. I would say it's probably the top-selling model in the industry right now. And that's a wide-body vehicle. And we are at the same time finding a good surge internationally in 3-wheelers. So we are unlocking that capacity. I am not giving you a number as yet, which is business unit related, is because there is a lot of fungibility and capacity. And therefore, I said from the current sort of 7 million, we'll go to 9 million plus in the medium term. That work has already started. But of course, to address your specific question on Chetak, it will be about 60,000 units in the immediate term. And then progressively, in high-end bikes, in 3-wheelers, electric as well as wide-body, and obviously, Chetak, we will increase capacity.

[Operator Instructions] Next question is from the of Rakesh Kumar of BNP Paribas. Sorry, next question is from the line of Gunjan Prithyani from Bank of America.

Two questions. Firstly, I just wanted to move into the launches that you spoke about. If I got it right, I think you mentioned 150cc, new -- the new 150cc under Pulsar, a couple of more refreshes in 125cc, and 2 new brands in 125cc within fiscal '27. I want to clarify that understanding is correct. And just continuing with that, given the sort of product action that we have in the second half of the year, how do you -- how should we think about the growth for the domestic business, particularly with the growth showed a little bit of fatigue last year and the growth wasn't as great last year, so how do we think about the growth in fiscal '27 industry as well as [indiscernible] so a bit more color around this?

So obviously, we are very positive about our outlook, not just because it's good to be optimistic and you can't say any other thing, but because of the acceptance of our recent launches, which I said we upgraded our products. these are also not new products. So first, I want to frame the lens through which you should look at our domestic motorcycle business. The first point I want to make is that, as you know, and we've been saying this, that while we are present in the 100cc segment, we are participating in it at our own terms. We are -- of course, we have to be competitive, but we have got an eye on the implications on the bottom line. So we want to participate on it on own terms. And when these get -- when growth and profitability, the baseline profitability starts getting into a conflict situation. In that segment, we tend to favor profitability and are prepared to lose market share. This is a segment which has been over the years underperforming. It has gone from 55% share of motorcycles to 45%. And so it is one of the key reasons why we feel that we must focus on so much more business opportunity which is there in the top half. Because in the bottom half, this segment is under pressure. I'm not saying that it will implode any day, not like that. These changes happen over a period of time. But over the last 5 years, something which was 55% has become 46% over the last 5, 7 years. So it is soft in its size and growth. And of course, as you know, it offers very little joy for profitability. And finally, our core competence is really innovation and R&D. And this segment offers less degrees of freedom to attack it on the basis of our core competencies. Therefore, the frame of reference is the 125cc plus segment, and from 125 to 400cc, where I must say that we are participating with 3 -- with 4 brands actually, which is Pulsar, it goes from 125 to 400; Dominar, which is 250 to 400; KTM, which is 250 to 400; and Triumph, which is 400. Even though KTM drive are different to Bajaj, we can't strictly call them Bajaj brands, but it is a very conscious choice that we have made that if we have to undertake a serious -- mount a serious challenge to entrenched players with good brands, it's not just about the product, but it is also about the brands. And as you all know, we will not go down the path of buying market share. So we want to do it at a competitive price, but not at a loss, therefore, have the right brand which to challenge entrenched competitors. So you should -- when you look at Bajaj, you should look at those -- you should look at these 4 brands. You should look at 125cc to 400cc segment, 500cc segment. Now here, if I rewind, let's say, when -- in fact, the precise point to which I would like to rewind is when the ABS regulations came in for the 150cc segment, and we rightly called out that this will imply a huge growth in 125cc. And therefore, we scrambled to extend the Pulsar brand, which still then was a 150cc, 180cc brand, into the 125cc. And it gave us very good gains because we immediately led to a very high level of market share, which sustained itself till about financial year '25, which is when the softness started to come because we were at the end of our product life cycle. And by FY '26, it -- we were reading the signs that fatigue get has stepped in into our portfolio of Pulsar. We therefore, after that, said that we will prioritize our core, our heartland, which was the genesis of Pulsar, which is a 150 to the 250cc range. And we set about reinvigorating the portfolio, like I mentioned. And this was the launch of some class-leading features in the N series, upgrades in the NS series. The NS series, which is the most premium end of 125 as well as the 200, 250, is growing, outpacing the industry, but chipping away at market share at the top of this pyramid. The N series is knocking share off competition, even entrenched competition where our competitive ratio is, in some of the states, 2 is to 1. And when I look at the state-wise performance of the N series and NS Series, I don't see any red color there. It is all green, which means we are growing, in the least, 1.5x that of the industry. We are acquiring market share ever since we have refurbished the range, which is quarter 3, which is November [indiscernible] and that has continued into quarter 4. So this has given us a lot of encouragement and validated our strategy. This strategy is now going to be taken to its fulsome play beginning 1st August. So not very distant. And between now and September, we will launch, like I said, almost 10 new variants, out of which these -- you've got it right, I just wanted to give you a historical context, but you got it absolutely right. There will be 2 brand-new Pulsar and new styles, new features, class-leading features, a lot of electronics, attractive color and graphics. And I would say that the Indian customer is going to be very pleased by the powertrain performance, which these -- because obviously, we've been doing all the tests. The launches are imminent. So yes, 10 plus 2 upgrades at 2 new models immediately in the next 6 weeks or so. With this, and based on the empirical evidence of the last couple of quarters, we are very confident it should shake up the industry and really raise the [indiscernible] part right in time for the season. And through this, I would say that there is more stuff coming towards the end of the fiscal, but we would be in very, very good shape. And hopefully, the season will be very good in the 125cc plus segment.

These are all on Pulsar platform, what you mentioned. But you also mentioned 2 new models by the end of the fiscal, those are new nameplates. Is it new nameplates? Or is it just the entire -- like reset of the portfolio or a refresh of the portfolio that we are doing? I just want to be clear, on the brand expansion, are we going from 4 to 5? Is that something also on the horizon?

Yes. At this point of time, we are looking at a different bank because the proposition will be different from Pulsar. And I can't reveal the propositions more at this stage. But because the propositions will be different, we don't want to sort of call them Pulsars. They will have a very specific angle to them and there will be 2 different brands. And we hope to not just capture a bigger share of the 125cc plus segment. But with this action, we hope to upgrade the 100cc customer. Because as you know, participating in the 125cc allows us more degrees of freedom in terms of product innovation. And hopefully, this customer will get attracted by it and travel up from 100cc to 125cc. That is also part of the strategic intent, which will get realized hopefully this year.

[Operator Instructions] Next question is from the line of Raghunandhan N. L. from Nuvama Research.

Congratulations on extremely strong numbers. Sir, just a clarification on the new product the upcoming product launches, you said all the introductions would happen by September, would that be right?

I think you're rather not taking me seriously. Yes. In the next 6 weeks, yes, a lot of the upgrades will happen. They will start to roll out. Like I said, there are 10 models which are being rolled out. It's a very, very hectic time. As soon as this call gets over, I have to go and do some work on the new launches. And then a couple of new brands, hope to buy within the fixed fiscal. But we'll see the timing. We have to look at the environment also to time it. You're right. I deliberately took some time over the last question, and the answer was really not just specific to the person who asked it, but I thought that everyone would probably get an idea of the strategic thinking which is there in Bajaj in the domestic motorcycles business.

Very helpful, sir. To Dinesh, sir. Sir, on the other expenses, it is lower as a percentage of sales, both Q-o-Q and Y-o-Y. You indicated cost savings, operating rate. Just wanted to understand, do you see this as a sustainable rate going forward? Given that there are so many launches, how do you see the trajectory ahead?

So, yes, I think for the first and possibly given the inflation outlook for the second quarter, we are going to be very hard to look at discretionary costs. Obviously, there are times in business when you have some leeway to be able to make investments and you're a bit looser with what you want to then spend on. But specifically on fixed costs is where we will be quite discerning about what we will spend in quarter 2 as well. Make no doubt about the fact that as the new models roll out, if we need to be spending money to drive competitiveness in the market and marketing activation and marketing spend, that's not the area that we're going to cut in with. It's more to do with the discretionary and establishment fixed costs that you can expect that we will keep very tight even as we get into quarter 2.

Next question is from the line of Rakesh Kumar from BNP Paribas.