Bajaj Auto warns of demand, supply challenges from ABS mandate on entry-level bikes

Bajaj Auto has flagged supply chain and cost hurdles stemming from the government’s proposal to make anti-lock braking systems (ABS) mandatory for all two-wheelers from January 1, 2026. The regulation, aimed at enhancing road safety, is expected to particularly impact motorcycles in the 100–125cc segment, which currently use the more affordable combined braking system (CBS).

Rakesh Sharma, Executive Director at Bajaj Auto, said the transition would put “huge requirements” on the supply chain. “It could take anywhere between 12 to 24 months to get the supply chain ready if every single two-wheeler has to be equipped with ABS,” Sharma said during the company’s post-earnings call for the first quarter on August 6.

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While acknowledging the need for improved rider safety, Sharma warned that the cost implications of such a shift could weigh on consumer sentiment. “We struggle to cut even Rs 500 from the cost. If prices go up sharply due to ABS, it will dampen demand—especially in the entry-level segment,” he said.

Sharma pointed out that the Indian two-wheeler industry has yet to recover to its FY19 peak levels, with one of the key reasons being successive cost escalations triggered by regulatory changes, insurance costs, and other compliance burdens. The proposed ABS mandate, he noted, risks repeating that cycle at a time when rural and value-conscious buyers are still cautious.

However, there appears to be room for negotiation. Sharma said the government is in active dialogue with industry players and has asked for additional data to evaluate alternatives. “They are open to understanding other options that may be more cost-effective and still improve safety. Those conversations are ongoing,” he added.

The auto sector is already navigating multiple challenges, including a supply crunch of heavy rare earth magnets used in electric vehicles. Any further regulatory burden, especially on the cost-sensitive end of the market, could deepen headwinds.

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Bajaj Auto Ltd reported a 14 percent year-on-year rise in consolidated net profit to Rs 2,210.44 crore for the fiscal first quarter of FY26, according to its stock exchange filing. Revenue from operations climbed to Rs 13,133.35 crore in Q1 FY26, marking a 10 percent increase from the same quarter last year.

The company sold 11.11 lakh units in Q1 FY26, up 1 percent from 11.02 lakh units in the same period last year. Total two-wheeler sales were flat at 9.49 lakh units, while commercial vehicle (CV) volumes rose 7 percent to 1.62 lakh units.

Domestic sales declined 8 percent on-year to 6.35 lakh units, led by a 9 percent fall in two-wheeler sales and a 2 percent drop in CV volumes. In contrast, exports grew 16 percent to 4.76 lakh units, with two-wheeler exports rising 14 percent and CV exports surging 32 percent.

Shares of the company ended at Rs 8,178, lower by 0.63 percent from the last close on the NSE. Bajaj Auto shares are down 7 percent since the beginning of the year.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.