Bajaj Auto Reports K-Shaped Demand as Drought Threatens Entry-Level Sales, Eyes Japan Through KTM

MUMBAI — Bajaj Auto is facing a contrasting market environment following a record quarter, marked by resilience in premium segments and mounting pressure on entry-level motorcycle sales.

Speaking to the media after the company's recent earnings announcement, Rakesh Sharma, Joint Managing Director of Bajaj Auto, noted that pressure on lower-income buyers could intensify during the January–March 2027 period, potentially exacerbated by drought conditions.

According to Sharma, drought conditions in parts of Maharashtra, southern India, and the Northeast threaten agricultural incomes. This rural slowdown risks affecting both motorcycle purchases and access to credit, with financiers expected to grow more cautious about lending in affected areas if crop failures impact repayment capacity.

While festive demand remains resilient, industry growth is expected to moderate from the 18% recorded between April and August, though it is anticipated to stay in double digits. The market is witnessing a distinct K-shaped recovery. Financially secure consumers continue to spend, while households dependent on regular incomes are deferring purchases.

Industry data reflects this divergence. Domestic motorcycle dispatches rose 10% to 69.2 lakh units during April–September 2026. However, the combined 100–110cc and 110–125cc categories grew by only about 5% to 48.6 lakh units, causing their market share to drop from 74% to 70%. In contrast, the 150–350cc categories expanded by approximately 31%.

During this period, Bajaj’s 100–110cc volumes declined 26% to 1,78,794 units, and 110–125cc sales fell 22% to 3,21,613 units. Sharma explained that the company has intentionally chosen profitability over growth in the 100cc class, acknowledging that price increases impacted overall volumes.

On the international front, Bajaj is exploring new growth avenues through its partnership with Austrian motorcycle maker KTM, which has returned to break-even following a liquidity crisis and management restructuring.

Bajaj supported KTM through component sourcing, cost reductions, and governance oversight, while allowing the Austrian firm to operate independently. The two companies are already exploring regional synergies in Mexico, Brazil, and the Philippines. In Brazil, KTM has set up an assembly operation next to Bajaj’s facility, with Bajaj Brazil handling marketing through its distribution network.

Furthermore, Sharma indicated that KTM's existing presence in Japan could provide Bajaj with an entry route into the Japanese market without requiring the construction of separate distribution infrastructure. However, he cautioned that the companies will wait for KTM's new management to fully stabilise operations before pursuing deeper collaboration.

"Bajaj Auto's current trajectory highlights a classic K-shaped economic trend where premium segments thrive while rural and entry-level markets face severe liquidity and income pressures. For established manufacturers, balancing profitability over raw volume in lower categories is a necessary protective measure. At the same time, leveraging strategic international partnerships, such as utilizing KTM's global footprint for market entry in regions like Japan and Brazil, demonstrates a smart, capital-efficient approach to overseas expansion during domestic uncertainties." — Dr. Shishir Gupta, Founder & CEO, StartupLanes