Bajaj Auto, India’s second-largest two-wheeler manufacturer, recently announced a remarkable 20% year-on-year increase in its standalone net profit for the September quarter (Q2) of 2023, surpassing expectations. Interestingly, this surge was not driven by two-wheeler sales, which declined by 13.5%, but by the legacy three-wheeler auto rickshaws—a market segment in which Bajaj holds a dominant 60% market share. This success story sheds light on a deeper issue: the inadequacy of India’s public transport system.
Impressive Q2 FY24 Performance
On October 18, 2023, Bajaj Auto reported its Q2 FY24 results, revealing a 6.23% increase in revenue and a 17.48% rise in profit compared to the previous year. In contrast to the last quarter, the company’s revenue increased by 5.1%, while profits surged by 22.86%. Selling, general, and administrative expenses decreased by 0.12% QoQ but increased by 11.41% YoY.
The operating income saw a 10.48% increase in the last quarter and a 21.17% increase compared to the previous year. Earnings per share (EPS) for Q2 FY24 stood at ₹71.4, representing an 18.8% year-on-year increase.
Bajaj Auto’s stock has delivered exceptional returns, boasting a remarkable 1.44% return in the last week, an impressive 20.43% return in the past six months, and an outstanding year-to-date return of 42.07%. As of October 20, 2023, the company has a market capitalization of ₹145,365.1 Crores, with a 52-week high and low of ₹5,274.9 and ₹3,520.05, respectively.
The Resurgence of Three-Wheelers in India
Sales of high-margin three-wheeler vehicles, including passenger and goods transport versions used for last-mile logistics, have been surging in India. Amid the turbulence of the pandemic-ridden year of 2020-21, the production of three-wheelers plummeted to a mere 614,613 units. However, the Indian automobile sector, as per the data from the Society of Indian Automobile Manufacturers (SIAM), displayed remarkable resilience in FY23, with sales roaring back to life, surging to an impressive 855,696 units.
Domestic three-wheeler sales, usually fewer than the numbers produced to account for pipeline stocking, stood at 339,690 units during April-September. Given the festival season and fiscal year closing between October and March, it is expected that last year’s numbers will be surpassed.
The Rise of Electric Three-Wheelers
Adding electric three-wheelers to the market has further enhanced this growth story. Electric three-wheeler sales surged a massive 118.25% to 404,143 units in FY23, up from 185,173 units sold a year ago. More than half of India’s three-wheeler registrations in 2022 were for electric vehicles, as reported by the International Energy Agency (IEA) in April.
The Deep-Seated Problem
While three-wheeler sales are impressive, India’s inadequate public transport system remains an underlying issue. The growing demand for auto-rickshaws and other intermediate public transport options directly results from the lack of robust, accessible mass public transport in India’s rapidly growing yet chaotically managed cities.
Despite daily usage by 70 million passengers, India’s public buses are sparse in number, totalling only 3 lakh and representing a minor fraction of the nation’s vast 326 million vehicle population. According to a study by the International Association of Public Transport, just 65 out of more than 450 cities with a population of over 1 lakh have a structured public transport system. The majority relies on para-transit options. Only three major cities—Kolkata, Mumbai, and Chennai—have a sizeable suburban rail network.
Addressing the Crisis
The Transportation Minister, Nitin Gadkari, has emphasized the wide gap in public transport infrastructure, contrasting India’s mere 0.4 buses per 1,000 people to China’s 6. To meet the rising demand, India would require 3 million additional buses. However, the focus has predominantly been on high-profile metro rail projects and light rail projects like monorails. India currently has 16 operational metros, with 16 more in the works, and the Union Budget has allocated over ₹20,000 crores for metro rail endeavours this fiscal year.
India’s National Transport Policy acknowledges the growing reliance on para-transit as public transport quality deteriorates and aims to restore public transport to its rightful role through improvement. Unfortunately, these intentions have not been matched with sufficient effort or outcomes.
Summary
As India’s festival season commences, city administrators and urban transport planners must take note of the resurgence of auto-rickshaws and recognize it as a symptom of the more significant issue—the inadequacy of India’s public transport system. Addressing these shortcomings is not merely a matter of convenience but a vital step toward shaping a sustainable and efficient urban mobility future in India. Bajaj Auto’s success with three-wheelers is a testament to the demand, and the onus is on authorities to deliver a comprehensive solution to this longstanding problem.
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