Bajaj Auto warns rare earth magnet shortage threatens EV production & growth
Bajaj Auto Managing Director Rajiv Bajaj has urged the government to provide greater transparency on the ongoing shortage of rare earth magnets, which is threatening to disrupt electric vehicle (EV) production in India. The scarcity of these critical components, mainly sourced from China, could result in Bajaj halting production of its Chetak electric scooter and electric three-wheelers by August.
The company, which has recently secured a leading position in the electric scooter and three-wheeler market, has already cut production by half due to dwindling inventory. With the festive season approaching, the potential halt poses a significant risk not only to Bajaj Auto’s revenue and profitability but also to its suppliers and dealers who rely on the EV business.
Bajaj highlighted the lack of immediate alternatives to rare earth magnets in the short term, noting that redesigning products or shifting away from Chinese suppliers is a long and costly process. While there have been industry discussions on potential relaxations under the Production Linked Incentive (PLI) scheme, no concrete policy decisions have been communicated to manufacturers.
The shortage is expected to impact costs, though the extent of price increases remains uncertain. A prolonged supply disruption could slow down the rapid adoption of electric scooters, which currently account for about a quarter of the scooter market, particularly in urban centers.
Bajaj Auto is also grappling with delays in receiving EV incentive reimbursements from the Maharashtra government, a problem that has persisted for over two years. The company has already passed on the incentive benefits to customers but has received only a fraction of the promised amount, creating cash flow challenges and raising concerns about policy execution.
Bajaj emphasized that clarity from policymakers and timely action are crucial to safeguard the momentum of India’s EV transition and maintain investor confidence in the sector.
