Updated on: 2026-02-16 As of: 2026-02-16 Latest price: Rs 10,250 (NSE) as of 2026-02-14 Market cap: Rs 2,85,000 crore Latest earnings period: FY26 Q3 (Dec 2025 quarter, released Feb 2026) Key sources: https://economictimes.com; https://www.autocarindia.com; https://www.bseindia.com

Event: Bajaj Auto's Chetak sold 25,520 units in January 2026, securing 21% market share in electric two-wheelers, up from prior months, as legacy players TVS, Bajaj, and Hero captured 60% combined share per Jato Dynamics data. Date: January 2026 sales data released early February 2026 Why the Market Reacted: Investors celebrated the shift from startup dominance to incumbents, viewing it as validation of Bajaj's supply chain execution and potential for margin-accretive EV scaling. Why This Is Not Just News: Market share gains mask subsidy phase-out risks by mid-FY27 and unproven localization economics; this analysis tests if EV margins can hold without FAME support amid 20-30% Chinese battery import duties.

Bajaj Auto trades at a premium assuming seamless EV transition with sustained margins, but this hinges on unproven localization benefits surviving subsidy cuts and ICE cyclicality in a high-interest-rate Indian economy.

Bajaj Auto generates 95% of revenue from two-wheelers (motorcycles 70%, scooters 15%, three-wheelers 10%), with exports contributing 40% of sales to emerging markets like Africa and Latin America, providing currency tailwinds but forex volatility risks. ICE motorcycles—Pulsar (premium) and Platina (entry-level)—drive 60% of EBITDA through 18-20% margins, leveraging Pune plant scale and low fixed costs; however, 70% domestic dependence exposes it to rural cycle slowdowns if monsoons disappoint or RBI holds rates at 6.5%. EV two-wheelers (Chetak) contribute <5% revenue but require 25%+ margins to offset R&D capex of Rs 500 crore annually; localization via Maharashtra gigafactory covers chassis and packs (60% BoM), but cell imports from China (30% BoM) cap savings at 15% vs rivals with vertical integration. Three-wheelers (RE segment) offer stable 12% margins from CNG/LPG shift under urban last-mile demand, acting as cash cow unless PLI EV three-wheeler subsidies dilute ICE pricing. Overall, profits hinge on ICE volume leverage (above 35 lakh units) and EV mix ramp to 15% without subsidy crutches; if EV EBITDA dips below 8%, group margins revert to FY23's 14%. Exports buffer cyclicality but falter if global commodity prices spike diesel costs. Management's Rs 1,000 crore EV capex in FY26 tests execution amid talent poaching by startups.

Revenue growth accelerated to 12% in FY26 TTM on export recovery and domestic festive volumes, but EBITDA margin expansion to 18.5% relies on operating leverage from 20% capacity utilization headroom; ROCE at 35% reflects zero-debt strength, funding EV capex internally unless ICE ASPs fall 5% on competition. Trends signal peak margins if EV mix exceeds 10% without 15%+ profitability.

Consensus assumes Bajaj's 21% EV share translates to 20% group margins by FY28 via localization, overlooking that 70% of Chetak BoM remains import-dependent amid US-China trade tariffs potentially hiking cell prices 20-25% if PLI cell manufacturing delays to FY28. Investors extrapolate January 2026's 25k unit sales linearly, ignoring seasonality—festive Q3 volumes were 50% higher—and subsidy cliff post-EMPS (Rs 5,000/unit max) ending FY27, which propped 30% of FY26 EV demand. ICE dominance (90% volumes) masks rural slowdown risks: Platina's 40% share in <Rs 80k segment faces Hero's mileage edge if fuel prices stabilize at Rs 100/litre. Export growth to 45% mix assumes Africa/LatAm stability, but 15% rupee depreciation needed for competitiveness is uncertain with RBI's hawkish stance. Non-consensus: Bajaj's dealer overlap (10k+ network) dilutes EV premium positioning vs TVS's dedicated channels, capping ASP at Rs 1.2 lakh vs Ather's Rs 1.5 lakh. If EV cannibalizes 10% ICE scooter sales at lower margins, group EBITDA compresses 200 bps. Thesis fragility: unless localization hits 80% BoM by FY27, margins revert to 16%, halving EV RoI.

Bajaj's 45x P/E embeds 18% EPS CAGR to FY29 with EV at 25% mix and 20% margins; downside to 30x assumes 12% CAGR if EV stalls at 10%. Premium to Hero reflects execution edge, but compresses unless RoCE sustains >30% post-capex.

Base case (50%) assumes 6% overall 2W penetration, flat margins on subsidy loss offset by scale; bull requires PLI extension and exports >50%; bear triggers on ICE recession (rural sales -10%) or cell prices +20%. Probability-weighted target Rs 10,200.

• EV volumes <10k/month sustained for 2 quarters invalidates localization payoff, as fixed costs erode 300 bps margins.
• SEBI/PLI policy shift cuts incentives 50% post-FY27 or raises import duties unevenly, favoring vertically integrated peers.
• Balance sheet strains if capex exceeds Rs 1,200 crore without ICE cash flows, pushing net debt/EBITDA >0.5x.

Bajaj merits 20% premium to Hero on ROCE/export mix but trades below TVS due to lagging EV leadership; discount widens if Chetak ASP falls 10% on competition.

• Chetak monthly volumes >25k and EV mix % in quarterly results; <20k signals demand weakness.
• Management guidance on cell localization timeline and PLI tranche approvals in FY26 concalls.
• RBI repo rate cuts or PLI EV subsidy extension announcements impacting affordability.

Bajaj Auto's investment case pivots on EV localization delivering 15%+ margins without subsidies, sustaining 18% group EBITDA amid ICE stability—but this assumes rural recovery, stable cell costs, and policy continuity, all fragile in India's high-rate environment. Market overlooks 200 bps margin risk if EV mix hits 15% prematurely, cannibalizing ICE, or if exports falter on global slowdowns. Uncertainty centers on FY27 subsidy cliff: if volumes hold sans FAME/EMPS, thesis strengthens; else, valuations de-rate to 30x. Track Chetak ASP trajectory, Q4 FY26 EV EBITDA reveal, and PLI filings. Investors should size positions assuming base case 15% penetration, with hedges via Hero for pure ICE play.