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MUMBAI: Bajaj Auto Ltd, the maker of KTM and Husqvarna motorcycles, continues to bet big on long-term growth potential of premium bikes in India and overseas, a senior company executive told Mint on Thursday.

"When most companies are conserving cash and reducing costs across operations to steer through this pandemic-induced global economic crisis, Bajaj Auto has decided to invest 650 crore to set up a second manufacturing unit in Chakan where we will make only premium motorcycles along with electric two-wheelers including Chetak," Rakesh Sharma, executive director, Bajaj Auto, said in an interview.

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"This investment should be seen as Bajaj Auto’s standpoint on the evolution of the premium motorcycle segments in India and overseas. We believe that premium motorcycles and electric vehicles would see a good play in the future."

Earlier this week, the company announced signing a memorandum of understanding (MoU) with the Maharashtra government to set up a second manufacturing unit in Chakan, near Pune.

The proposed facility, with a capacity to manufacture up to 1 million units per annum, will be solely used for the production of premium motorcycles under the KTM, Husqvarna, and Triumph brands along with electric two-wheelers.

According to Sharma, the unit will likely commence operations by the second half of fiscal 2022-23.

While Bajaj Auto plans to launch Triumph branded mid-capacity motorcycles, under its collaboration with the British motorcycle company, by early 2022, it is also looking to expand the production of its electric scooter Chetak next year.

The company's existing plant in Chakan, which has an annual production capacity of about 1.2 million units, runs full capacity every time demand surges, making it difficult to clear order backlogs.

The second unit will thus help Bajaj Auto accommodate planned production of Triumph bikes while boosting volumes of electric scooters and KTM models.

"The existing Chakan unit is currently operating at 75% capacity utilization. It operated at similar levels in FY2020. When the demand surges, let's say, during the festive season or when export requirements go up, then it touches almost 100% capacity utilization. Even right now I would say that the Chakan factory is very stretched," Sharma said, adding that a lot of engineering projects are also incubated at the facility.

The company currently makes about 30 different models at its Chakan unit across KTM, Husqvarna, Dominar, Pulsar, electric Chetak scooter, and others.

"Because these models, made at the Chakan unit, are exported to 70 countries wherein each country has its own regulatory norms, we end up making 400-500 different SKUs or stock keeping units. As a result, the variability in production involving high-end bikes is very high, stretching the manufacturing unit," Sharma said.

The company also has plants in Aurangabad and Pantnagar with production capacities of 2.4 million units and 1.8 million units respectively.

On electric scooters, Sharma said the company plans to expand retail operations to 30 cities in FY 2021-22.

"Right now we are present only in 2 cities – Pune and Bangalore. We have been hit by the fragility of the supply chain both on the electronic components and the battery. Although we have a very heavy localisation program but that is also dependent on imports on the electronics side," he said, referring to the ongoing shortage of semiconductors.

"We plan to take Chetak to 30 new cities in FY22 but we will be closely monitoring how soon the supply chain stabilizes," he added.

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