Magnet Crunch Puts Bajaj EV Output—and Shareholders—at Risk

Bajaj Auto is facing a severe threat to its electric vehicle business due to a shortage of rare earth magnets, triggered by new export curbs from China. The company has warned it may not be able to produce any units of its popular Chetak electric scooter and GoGo three-wheeler in August, after already being forced to halve output in July. This situation marks the first time an Indian automaker could completely halt EV production because of global supply chain disruptions for a critical component. Rare earth magnets are essential for not only electric vehicles but also for internal combustion engines, renewable energy, consumer electronics, and defence industries. China remains the world’s dominant supplier, making Indian companies highly vulnerable to policy shifts there. Bajaj managed full production in June by relying on existing stocks, but those buffers have now run down. For shareholders, this development is clearly detrimental. Bajaj recently achieved leadership in the Indian EV market, and its electric range has become profitable. A sudden production halt will hurt monthly sales, revenue, and EBITDA, directly impacting profitability and investor sentiment. The market has responded: Bajaj Auto’s shares have already dropped over 2.5% on the news. Long-term confidence could erode further if the shortage persists. The company has urged the Indian government for more clarity on supply chain risks and policy support but has not received any concrete assurance. There are currently no viable short-term alternatives, and medium-term solutions—like diversifying suppliers or redesigning products—would take time and bring significant cost and quality risks. In summary, the supply crisis highlights the dangers of overdependence on a single source for critical materials in a globalized industry. Until India builds its own rare earth supply chain, shareholders should brace for further volatility and possible setbacks in Bajaj Auto’s growth ambitions.