Bajaj Auto faces drought squeeze, eyes Japan entry through KTM

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Bajaj Auto is balancing weaker demand among price-sensitive buyers with international expansion prospects as its Austrian partner recovers from financial distress

By Amit Vijay Mohile

Updated - October 28, 2026 at 04:40 AM.

Rakesh Sharma, Joint Managing Director, Bajaj Auto

Bajaj Auto is emerging from a record quarter with contrasting challenges and opportunities: drought threatens to deepen the slowdown in entry-level motorcycles and tighten rural financing after the festive season, while Austrian motorcycle maker KTM’s return to break-even could open a route for Bajaj into Japan. Premium motorcycles and electric vehicles continue to outperform, highlighting the widening divide in consumer demand.

Responding to questions from businessline during Tuesday’s post-results media interaction, Rakesh Sharma, Joint Managing Director, Bajaj Auto, said pressure on lower-income buyers could intensify during January–March 2027.

“This has already been happening for the last two quarters. I feel that this will get accentuated with drought,” Sharma said, referring to consumers postponing purchases.

• Read also: Bajaj Auto profit rises 62% as export surge and EV momentum

Drought threatens entry-level motorcycle demand

Drought conditions in parts of Maharashtra, southern India and the Northeast could weaken agricultural incomes, affecting motorcycle purchases and access to credit.

Sharma warned that financiers could become increasingly cautious about lending in affected areas if crop failures undermine repayment capacity. Bajaj’s captive financing business would also need to monitor the situation.

While festive demand remains resilient, Sharma expects industry growth to moderate from the 18% recorded during April–August, although it could remain in double digits.

The divergence is already visible. Domestic motorcycle dispatches increased 10% to 69.2 lakh units during April–September 2026, but the combined 100–110cc and 110–125cc categories grew only around 5% to 48.6 lakh units, according to industry data. Their market share fell from 74% to 70%, while the 150–350cc categories grew by about 31%.

Bajaj’s 100–110 cc volumes declined 26% to 1,78,794 units, while 110–125cc sales fell 22% to 3,21,613 units.

Sharma described this as K-shaped growth, with financially secure consumers continuing to spend while households dependent on regular incomes deferred purchases.

“Our issue is in the 100cc class, where we have chosen profitability over growth,” he said, acknowledging that price increases had affected volumes.

KTM recovery opens potential Japan entry route

Overseas, Bajaj is exploring another growth avenue through KTM, which has reached break-even following its liquidity crisis and management restructuring.

Sharma said Bajaj supported KTM through component sourcing, cost reductions, and governance oversight while letting the Austrian manufacturer operate independently.

The companies are exploring synergies in Mexico, Brazil and the Philippines.

In Brazil, KTM has inaugurated an assembly operation alongside Bajaj’s facility. KTM will import and assemble motorcycles, while Bajaj Brazil will market them through its established distribution network.

Sharma indicated that KTM’s existing presence in Japan could eventually give Bajaj an entry route without building separate distribution infrastructure.

“If they’re good in Japan, then why the heck do we need to go to Japan? If there is some opportunity to build a business, we’d rather do it through KTM,” he said.

However, he cautioned against rushing deeper collaboration before KTM’s new management stabilises operations.

The contrast underscores Bajaj’s immediate challenge: protecting profitability as entry-level demand weakens at home while turning KTM’s recovery into an international growth opportunity.

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Published on October 28, 2026

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