The looming supply chain risk of rare earth magnets from China, a critical component in electric motors, is threatening to disrupt two-wheeler maker Bajaj Auto’s electric vehicle production from July, the management has cautioned during the Q4FY25 earnings call, weighing down the stock price by over two percent to be the top loser on the benchmark equity index on May 30.
"There’s a dark cloud on the horizon," the management said in the Q4 earnings call, referring to new regulatory hurdles in sourcing rare earth magnets. While a formal process has now been laid out for certifying that these materials will not be used for military purposes, the fate of shipments from China remains in a limbo.
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As per the defined protocol, Indian importers - in this case, Bajaj’s vendors - must self-declare the end-use of these materials, which then undergoes a multi-step certification process involving Indian authorities and the Chinese Embassy in India.
"So far, around 30 such applications have cleared all stages in India and have been sent to Chinese authorities. We now wait to see how smooth this approval process will be," the company said, adding that any delay or disruption could affect production from July.
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With nearly 90 percent of global rare earth magnet supplies coming from China, finding immediate alternative sources may not be feasible in the near term, the company said. Developing substitutes would require time-intensive investment in testing, validation, and integration into existing vehicle systems, making it a medium-term solution, at best.
In Q4FY25, Bajaj Auto posted a 6 percent rise in the net profit at Rs 2,049 crore, beating estimates. Strong motorcycle exports and forex gains helped offset weak domestic demand. The two-wheeler maker’s revenue rose 6 percent to Rs 12,148 crore in Q4FY25 as compared to Rs 11,485 crore in Q4FY24.
At about 1 pm, shares were trading at Rs 8,669, lower by 2.3 percent, to be the top loser on the Nifty. Shares of Bajaj Auto have risen 13 percent during the last three months.
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