Bajaj Auto halves EV output amid rare earth crunch, races to secure alternative supplies

Bajaj Auto shares are down 7 percent since the beginning of the year.

Bajaj Auto has slashed production of its electric two-wheelers by up to 50 percent in July as a deepening global shortage of heavy rare earth magnets disrupts supply chains. The automaker expects output to remain constrained in the coming months, with August and September also likely to see production at just over half the planned levels, Bajaj Auto said in its post-earnings conference call on August 6.

The supply crunch stems from China's suspension of magnet exports since April. As the dominant player in the rare earth space—accounting for 60 percent of global production and 90 percent of refining—China’s pause has sent shockwaves through the auto industry, particularly electric vehicle (EV) manufacturers that rely heavily on these components.

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"Non-availabilities have begun to compromise production in June itself, resulting in some shortfalls in deliveries to dealers in June. July has seen a 50 percent shortfall. While we expect production in August to be better than July, we may still see a shortfall of similar levels of 50 percent in this quarter in Chetak and about 25 percent to 30 percent or so in E autos," Rakesh Sharma, Executive Director and Chief Technology Officer, said. "Multiple options, both short-term and long-term term are being pursued at the same time, ranging from simply working with authorities to reopen the flows of HRE magnet as well as to developing alternate sources and alternatives to HRE-based components," he added.

Rare earth magnets are crucial in EVs, enabling high-performance motors in compact spaces and powering critical electronics. The shortage has not only forced Bajaj Auto to cut output but also weighed on overall industry sales. In July, the company—India’s second-largest electric two-wheeler maker—saw registrations dip 15 percent month-on-month to 19,650 units.

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To prevent further disruption, Bajaj Auto has been quick to adapt. The company is now exploring two parallel tracks: replacing heavy rare earth magnets with more easily available light rare earth variants and developing entirely new technologies that bypass rare earths altogether.

Bajaj Auto Ltd reported a 14 percent year-on-year rise in consolidated net profit to Rs 2,210.44 crore for the fiscal first quarter of FY26, according to its stock exchange filing. Revenue from operations climbed to Rs 13,133.35 crore in Q1 FY26, marking a 10 percent increase from the same quarter last year.

The company sold 11.11 lakh units in Q1 FY26, up 1 percent from 11.02 lakh units in the same period last year. Total two-wheeler sales were flat at 9.49 lakh units, while commercial vehicle (CV) volumes rose 7 percent to 1.62 lakh units.

Domestic sales declined 8 percent on-year to 6.35 lakh units, led by a 9 percent fall in two-wheeler sales and a 2 percent drop in CV volumes. In contrast, exports grew 16 percent to 4.76 lakh units, with two-wheeler exports rising 14 percent and CV exports surging 32 percent.

Shares of the company ended at Rs 8,178, lower by 0.63 percent from the last close on the NSE. Bajaj Auto shares are down 7 percent since the beginning of the year.

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