**Bajaj Auto Shifts to Light Rare Earth Magnets Amid Production Challenges**
Bajaj Auto Ltd is adapting its production strategy by utilizing light rare earth magnets to resume manufacturing of electric two- and three-wheelers. This shift comes after the company faced significant production setbacks in June and July due to a shortage of heavy rare earth magnets, exacerbated by China’s export restrictions.
On Wednesday, the management announced that production of electric two-wheelers is expected to reach only 60% of the previously planned output for August and September, while three-wheelers will achieve 75% of their intended production during the same timeframe. Rakesh Sharma, Executive Director at Bajaj Auto, noted that the production issues began in June, leading to a 50% reduction in output by July, which also impacted sales in the first quarter.
As a result of these challenges, Bajaj Auto has postponed several launches of electric two-wheelers that were scheduled between July and September. Sharma explained that the company is transitioning to light rare earth magnets, which has allowed for a gradual recovery in production as conditions improve month by month.
Rare earth magnets are categorized into light and heavy types, with heavy rare earths facing export restrictions from China, while light rare earth magnets remain available for export. The performance of electric vehicle motors typically improves with heavier magnets, prompting engineering teams to work on optimizing performance with the lighter alternatives, as there is currently no clarity on when heavy rare earth imports will resume.
Bajaj Auto follows Ather Energy Ltd as the second two-wheeler manufacturer to pivot towards light rare earth magnets. Earlier, Rajiv Bajaj, the company’s Managing Director, indicated that August could see zero production for the flagship Chetak EV due to the ongoing magnet shortage. Ather’s management recently reported that their dealer dispatches would be affected by a week’s worth of volume loss due to production constraints in the second quarter.
This production commentary comes at a time when the festive season is anticipated to boost vehicle sales, as consumers are expected to increase spending. TVS Motor Company, the third-largest two-wheeler manufacturer in India, stated last week that it is managing only day-to-day production while exploring alternatives to mitigate the impact of the rare earth magnet shortage.
Despite these production challenges, Bajaj Auto reported a 14% year-on-year increase in net profit, reaching ₹2,210 crore in the June quarter, with revenue rising by 11% to ₹13,642 crore. This profit growth was supported by an expansion in the consolidated operating margin to 21%, up from 20% the previous year, driven by a 14% increase in exports and rising average selling prices.
**FAQ**
**Q: Why is Bajaj Auto shifting to light rare earth magnets?**
A: Bajaj Auto is transitioning to light rare earth magnets to mitigate production disruptions caused by a shortage of heavy rare earth magnets due to China’s export restrictions.
