Ladies and gentlemen, good evening and welcome to Q3 FY2023 results conference call of Bajaj Auto Limited. My name is Yashaswi and I will be your coordinator. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the initial remarks from management. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Newar, Head, Investor Relations from Bajaj Auto Limited. Thank you and over to you, sir.
Thanks, Yashaswi. Good evening, everyone, and a very Happy New Year to each 1 of you on the call today. Welcome to Bajaj Auto's Q3 FY23 earnings conference call. On today's call, we have with us Mr. Rakesh Sharma, Managing Director and Mr. Dinesh Thapar, Chief Financial Officer. We will begin our call with the opening remarks from Rakesh on the business and operational performance of the quarter, and Dinesh will take you through our financial highlights. We will then open the forum for the Q&A. Over to you, sir.
Thank you, Anand. Good evening, ladies and gentlemen, and a very Happy New Year to everyone. We are very conscious that there's a long weekend shaping up if you take 27th off. We really appreciate your taking the time out this evening to join the call. We did want to have this conversation close to the announcement of our results, which happened a couple of hours ago, but I hope you've been able to go through that. Let me begin with the highlights of our performance in Q3 . This quarter, yet again, we surpassed our previous highs, recording an all-time high EBITDA, as you know, for the second time in a row through margin expansion of almost 400 basis points.
This performance is particularly delightful for us because it has been delivered against the backdrop of very difficult trading conditions in overseas markets, which, as you know, account for almost 50% of our sales. Indeed, this resilience is the result of a strong and diversified product market portfolio with leading competitive positions in key segments as well as robust operational management. Exports continues to face strong headwinds due to the difficult macroeconomic environment in most emerging markets. Industry retails in South Asia, Africa and LatAm were down by almost 30% in Q3 compared to the previous year Q3 . ASEAN markets were an exception and they bucked the trend, recording a double-digit growth, which is largely the release of pent-up demand from COVID because, you know, they've taken longer time to deal with the COVID situation.
Devaluation driven price increases and erosion of purchasing power due to across-the-board inflation in emerging markets has impaired demand, and that's why it's at -30% level. While for the last 3 months or so the retails have now bottomed down and holding steady at these lower levels, availability of US dollar for trading at a cost of each time taken by most central banks to convert foreign exchange continues to make operations quite difficult. In this scenario, our prime objective has been to hold on to our competitive positions. In fact, expand on our competitive positions by not relenting on new product introductions, et cetera, and also to minimize the exposure of our channel partners to currency volatility. We continue to keep their sort of business strengths going.
Our market share therefore in key territories remains strong and steady, and our stocks on the ground are well matched to the lower level of retail. Indeed, in some markets we are facing a stock out situation because forex has not been readily available to allow for shipments to take the stocks up to the levels which are now needed to service the demand, even though they're at lower levels. Looking forward in exports, while we see the retails improving as customers digest new prices, we are sanguine about the availability of forex, particularly in South Asia and Africa. Our largest market, Nigeria, will continue to be depressed and volatile till the elections get over in February and a peaceful transition to the new government takes place. Then also the effects of their recent demonetization settle.
Therefore, at an overall level, we estimate that it'll take perhaps till May or June for normalcy to start returning, first in Latin America, then followed by Africa. Thereafter we can start to rebuild the stocks and address high demands. We hope we will then see a release of some pent-up demand which is getting created as we talk, and this will get released once the foreign exchange starts to flow. On the positive side, ASEAN industry continues to do well and we continue to improve our market share there, led by Philippines. In Philippines, I must just tell you that we are now market leaders and our products are commanding a premium over Japanese competition as well.
In December, we launched the Dominar brand in Brazil to an outstanding reception. I invite you to check out the comments on Bajaj Brazil Instagram handle, as you will witness firsthand the excitement for Bajaj and Dominar out there in Brazil. We have launched only in the São Paulo region through top-class exclusive store and are now encouraged by the tremendous response, both from the trade and the customers. We're now accelerating our distribution footprint and upping shipments there. The idea will be to go slow and steady, build an outstanding network and a brand which gives a very good retail experience and ensure that supply chain is predictable.
Further, on the positive side, the rupee realization for the quarter was above 82 per dollar, which is a 3% improvement sequentially and 9% improvement year-on-year, thereby providing more juice to our top line as well as our bottom line. Coming to the domestic motorcycles business, the industry recorded a 14% growth in retail terms, though December itself was negative, October was hugely positive. Our estimate is that at an underlying level, sanitizing for base effects from the previous year, the industry is probably growing at about a 3%, at an optimistic level, 5%, and should remain on this trajectory year onwards. Really, the turnaround in the fate of the industry happened during the festive. As you will recall, before the festive, the industry was in negative territory. Post-festive was good. Post-festive, slight negative, That's because December was too close to the festive.
We're getting a sense that, you know, it's in low single digits. This growth is largely driven by the top half, which is the 125 cc + segment. It has grown by almost 28% as an industry in Q3 in retail terms, taking its segment share up by 5% points now to 50. The market is now really evenly divided between below 125 cc and above 125 cc. It's quite a dichotomy that both these halves are behaving quite differently. The entry-level under cc segment continues to suffer, and rural demand continues to remain soft. Against this backdrop, we have maintained for quite a few quarters now our firm focus on profitable growth, driving market share up by selectively focusing on key segments and enriching our mix in each subsegment at the same time.
There has been a new product launch in each of the 3 months. In October, we launched the carbon fiber edition of the Pulsar 125, adding a sportier appeal to the product. It has been very well received as 85% of our 125 cc sales now come from the carbon fiber edition, which has improved volumes, bumped up the ASPs and obviously improved margins. In November, we launched the new Pulsar 150, the most agile and stylistic commuter in the 150 cc segment. Combined with its bigger sibling, the dual channel Pulsar N160 ABS, the portfolio is growing rapidly. The 150, 160 portfolio, the heart of the sporty commuter segment, it's growing rapidly. We are up 28% in December. This has allowed us to move to a 40% level of market share in this segment.
The new Pulsar 150 launched in November itself accounts for 25% of the portfolio already. The N160, the dual channel, Pulsar N160, which was launched somewhere, I think, in July, has now brought in almost 10 % points of market share. May I remind you that this is just 1 SKU. It's just in track and done outstandingly well. These statistics signal widespread acceptance of the new platform. We were obviously concerned because Pulsar is our flagship brand, and after almost 10 years, we were, you know, rejigging the platform, and it's an absolutely new 1, and obviously we were concerned about its acceptance. It has gone off extremely well. Our early research suggests the stylistic and nimble Pulsars are also attracting newer and more youthful customers.
You know, 1 of the issues which we had started to get feelings about the last couple of years, we're finding that the demographic in Pulsar had sort of moved up in age, and we wanted to get back to the youthful customers, which both these, the N160 and the Pulsar P150 are delivering, which is therefore expanding our Pulsar franchise. We'll be fully leveraging 3 successful launches in the next few months to an above the line and below the line high-intensity campaign. Finally, in December, we launched the Platina 110 cc with the first-in-segment ABS feature, an added safety feature which we believe will delight the customers in the executive 100 cc segment. The ABS braking in Platina provides precise braking, shorter braking distance, as well as better control and stability.
It is early days, our reports suggest that the ABS on or Fikar Not proposition is being very well received. We hope to mount a stiff challenge to the existing players. By creating persuasion through the very topical and important attribute of safety. Overall, we have gained about 2% market share in the 125 cc + segment at a retail level sequential basis. We have increased our ASP by almost 17% and positively impacted EBITDA. The 125 cc+ segment now accounts for 66% of our sales. With our portfolio of 20 models between the 125 cc and the 400 cc, 20 models. Compared to let's say 13 or 14 of the next competitor. We straddle the top half of the motorcycle industry with a Pulsar for every maniac.
As this segment continues to drive growth for the industry, we believe we are very well positioned in it to grow faster than competition. In addition to that, the Platina 110 ABS, which is going V combi, will hopefully add new volume to the 125 cc + volume which we are getting. Domestic 3-wheeler, it has delivered a spectacular performance, notching up a market share of 76% in Q3. The 3-wheeler industry has recovered to 75% of pre-COVID levels, while we are now at almost pre-COVID levels. Our performance is driven by the success of our products in the expanding CNG segment. With 80 CNG pumps being added every month, almost 45% of our country is covered by a CNG network, and almost 65% of today's 3-wheeler industry is now driven by CNG.
Our market share in CNG is an overwhelming 86%, and 72% of our portfolio is CNG. Which is very good for our ASPs, we are 15% higher than petrol. Also even better for our margins, which reflects the pricing power enjoyed by our products, which has made a great position as the most reliable CNG products in the Indian market. Our 3-wheelers, electric 3-wheelers are in field testing. Round 2 of field testing, if you recall, I had mentioned to you all that after round 1 of field testing, while we discovered that the customer, the commercial drivers were needing a few more things. We went back, we've adjusted it, and we have now confirmation that we are delivering best-in-class range.
Basically, they were dissatisfied with the range the new 3-wheeler was delivering, and we felt that we had to go back, make the range delivery longer and more certain. This is a key requirement. We expect to launch in selective markets by end of March. Our objective is that we will be taking it slow and steady. We think we've now got the product. Those changes will be made during February and March, and we should start dispatching in end of March. On Chetak, we crossed the 10,000 vehicles mark in the quarter. With clarity on supply chain, we have launched an expansion drive into new cities. Encouraged by the rate of adoption of EVs in the scooter segment, we have decided to set up an independent network of Chetak stores.
While Chetak was earlier being sold through our Pro-biking stores along with KTM and Husqvarna brands. We have decided that Chetak should now deliver an exclusive retail experience to customers through standalone Chetak stores. We have the option of using the Pro-biking stores, using our 800 odd stores in motorcycles. We believe that customers will be looking for a differentiated retail experience, differentiated ownership experience. We have taken the call to now set up these Chetak exclusive retail stores as well as service stores. We consider our EV initiative, as I've been saying to you, akin to a marathon, so we need to be ready for the long run. Also for different scenarios of exacting quality standards.
As you know that the government is mandating a new quality standard from 1st of April. Be prepared for possibly a lower subsidy scenario in the next 2, 3, 4 years. With this framework, we remain focused on our triple objective. The first one is strong R&D and supply chain. Progress on that. I can confirm that supply chain constraints have been totally removed. We have options now. We have the confidence of sustained high level of supply chain performance. R&D has reconfigured products, brought down costs, and are in much better shape to build newer products. Our 2nd objective will be to expand the portfolio to adequately cover emerging segments. The, I mean, EVs are now large enough for people to start to, you know, have different preferences and those different preferences to actually become sub-segments.
Financial year 2024, we'll see a slew of launches which will address different demographics, lower pricing, and personal as well as delivery use cases. 3rd objective was to build Chetak to be a premium and preferred choice in top 100 cities. Chetak already enjoys a very differentiated and a premium image. Our new communication just launched builds on the likeability of Chetak, which we have heard through from customer feedback. The communication campaign is now centered around the theme of Handle Without Care. We believe we will deepen this premium position by giving a superior retail experience in our exclusive Chetak stores and dedicated service centers. As we speak, we have from the previous, I think, Q2 of being present in about 37, 38 cities. Are already in 50 cities.
We should be in 85 by end of March and 100 by April. In this quarter, we will also commence supplies of Bajaj designed and manufactured products to Yulu, who is our strategic partner in the micro-mobility space. You will see that in the space of the next 6 months or so, we will have a portfolio which will span from the low speed, low weight, low range delivery and delivery and personal mobility product to the top of the line personal mobility, top price, personal mobility scooter and other products in the mix. Being sold through about 150 spots across the country. Finally, I must put in a word about our spares business.
We don't talk about it too much, our spares business has reported its highest ever revenue of INR 1,100 crores this quarter. This is driven through our conscious drive to improve customer interactions, processes, and in interface through implementation of first in the industry initiatives such as PPM and NTS, resulting into improved pin rates, introduction of annual maintenance contracts, extended warranties, et cetera. We will be deepening our engagements with the retail side of the business, and we hope to continue this trajectory of growth in the highly profitable spares business area. With this now, I would like to hand over the floor to Dinesh for his commentary.
Thank you, Rakesh. Good evening, everyone. Given that this is the first time that we're speaking in the year, let me wish all of you a very happy new year. Thanks once again for joining us, you know, this late in the evening. We just wanted to get the call done as soon as our results were announced so that you get a sense of what's gone behind them. Now, let me start, as is typical, by giving you a sense of the operating context. It always helps set a frame of reference against which our financial results were delivered. The quarter saw continued weaknesses in overseas markets. You just heard it from Rakesh. Macroeconomic challenges, inflation, dollar unavailability, and local currency devaluation across markets have continued to subdue industry volumes across overseas geographies.
That's really led to a decline of anywhere between 25% to 35% in market volumes relative to last year. You know, in some of the geographies and countries, particularly in South Asia and Africa, this drop has been even more pronounced. It's only in the recent quarter that we're starting to see some pressure build up in Latin America as well. On the domestic front, festive period sales have been pretty steady, and the 125 cc class segment has led the broader market, as indeed our own sales. The market seems to have slowed down post the festive period. It is quite normal for that to happen each year. This year we've seen a little bit of the market come off in the period following festives.
As for commodities, the broader purchase basket, excluding specific EV components, so I'm keeping EV components aside. Across the broader purchase basket, we've seen them soften, and this is in line with what I had called out in the preceding quarter. That's clearly provided some respite to our bottom line. Finally, the semiconductor supply situation has now stabilized, relatively speaking. Fewer conversations on it, although it still remains very tight across players. We've continued with our very definitive actions on securing our supplies and have added even further alternate sources to navigate the situation. We have many more suppliers today than we did 6 months back.
Overall, our financial performance this quarter has yet again reflected a well-diversified business with a strong position across, you know, we have a strong position across domestic and export markets. This time around, yet again, domestic, which has led the way. That has enabled the resilience of our performance. The drag on exports from the challenges in overseas markets was well alleviated by the relative buoyancy in our domestic performance. Our revenue from operations was up 3% year-on-year at INR 9,315 crores, with robust double-digit revenue growth across both domestic 2-wheelers and 3-wheelers. This revenue performance is despite a 17% decline in volumes, which you're very familiar with because we report our numbers each month, and that's really led out of the weaker export volumes that you'd be aware of.
The overall improvement in revenue was primarily led by 3 factors. I'm now talking year-on-year for a bit. Better foreign exchange realization. Our dollar realization, rupee to dollar realization for this quarter was at 81.7, as against 75.1, same time last year. 79.8 for the last quarter, so that helped. Price increases, now we're talking year-on-year, recognize that, for the H1 of this year, the early part of the year, we had commodity inflation. I'm now talking year-on-year numbers. Price increases were about 5%, in the last 12 months. However, for the last quarter, so when you look at between Q2 and Q3 , we've not really taken any price increases, so that's been flattish quarter-on-quarter.
Thirdly, richer mix, which you would have guessed, you know, from our commentary, in terms of what was leading the growth, through a higher share of domestic 3-wheelers and the sports segment and a lower mix of domestic and export entry-level bikes. You just heard Rakesh and I'd like to reiterate that it's not always that we report an all-time high on spares, but that has been notable and contributed to both top line and bottom line performance. Speaking of our profits, we surpassed our peak. You will recall that we had registered a record high, the last quarter, which was Q2 FY23.
We surpassed it this time around and made a new record with our highest ever EBITDA of INR 1,777 crores, with an underlying margin expansion of 390 basis points year-on-year and 190 basis points over the last quarter. You know, again, to explain the strong year-on-year improvement, this was primarily driven by improved dollar realization and judicious pricing to cover costs. That's the year-on-year basis. However, when looked at from a quarter-on-quarter perspective, and now this is quarter 2 to quarter 3, the improvement has primarily come from softer material costs, as we had indicated in the previous quarter. Of course, better dollar realization has continued to aid the margin story. Notably, this record EBITDA performance comes at a time when both our export and domestic volumes, you know, are way lower from their peaks.
Therefore, the way I see it offers the prospect of significant headroom for growth, as volume levels trend back towards their respective highs. Let me spend a minute in talking about commodity costs, considering over the last couple of quarters it has softened and therefore has been a contributor to the overall margin recovery. In this last quarter, which is essentially Q3 FY23, we have seen softer costs across the broader commodity basket. Whether it's steel, aluminum, noble metals, all of them have come off. The exceptions have been rubber and plastics, which have shown marginal inflation. Conversion costs have continued to remain rather tight, as you would imagine, given the impact arising from utilities and energy costs.
As we look ahead, this is more for Q at next quarter, we're starting to see some uptick on aluminum, nickel and copper in particular. On balance, as things currently stand, I expect the upcoming quarter to be by and large flattish or possibly a near marginal uptick compared to this previous quarter, unless of course there are events which alter this course. As is typical, I wanna make a quick comment on cash, given how integral it is in measuring the health of our business. We continue to maintain a very strong track record of cash generation. Our surplus cash stood at near about INR 15,000 crores, a very healthy level, after paying out the INR 3,100 crores towards buyback and its tax, which we've completed the last quarter.
I'm not gonna go into the details of the buyback. We've put out enough communication on it and you're well aware. The point I'd like to leave with you is that we're still sitting on a very healthy balance sheet that offers us enough muscle and flexibility to invest sufficiently in capabilities and growth opportunities. Let me end by saying that as we look ahead, you know, it continues to remain our priority to step up our revenue momentum and drive our market shares. In the domestic motorcycle business, we will look to engage with all customer segments through sharp execution and activation of the Platina 110 ABS, you heard Rakesh talk about this at length, you know, for the entry-level commuters.
you know, bring the full might of the Pulsar portfolio to drive the fast growing 125 cc + segment. On domestic 3-wheelers, we're looking to sustain a strong market leadership position, recognize we are at an all-time high in this quarter on market share, and we're looking to drive for fuller recovery towards the pre-COVID levels. As for exports, given the outlook for some of the overseas markets, it does appear that it could remain soft and challenging in the very near term. It's against this context, what we're looking to do is to take a few actions to sandwich volumes wherever we can.
While volumes might still be a little lower than the peaks that you might have seen in the past, what we will certainly look to do is to secure unflinchingly our competitive position, which has held steady so far through this challenging situation. Alongside, we will stay the course on the agenda to build up our EV business with Jason and look at a potential launch of the EV 3-wheelers in a couple of months. In doing all of this, of course, let me add, we will continue to dynamically manage this business for a very healthy profit delivery. With this, let me hand the session back to Anand, and we can then open it up for Q&A. Anand, over to you.
Thank you, Dinesh. Yes, Yashaswi, with this we can open the floor up for the Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our 1st question from the line of Kapil Singh from Nomura. Please go ahead.
Yeah. Hi, good evening, sir. I just wanted to understand on the gross margins, you know, we've seen almost 300 basis improvement. How much of that has come from commodity? Also I, if I heard you correctly, you mentioned that as the volumes grow, you know, through the next year, you would expect to build on margins from here on. Is that the right way to think about it?
Kapil, you're right. I think, you know, quarter-on-quarter, I did make a mention that the biggest driver of margin improvement has been the lower raw material cost. Because we've seen costs coming off across the breadth of both the metals and the energy portfolio, with the exception of plastics and rubber as I've mentioned. Let me say that almost 70% of the margin improvement that you're seeing quarter-on-quarter has come from softening commodity costs.
Okay. Going ahead, as volumes go up, you would say that this forms a base and we should see a further improvement because there could be some adverse impact from lower entry segment mix also. That's why this question is there.
Sure. Sure. Let me answer that by saying that at least a big driver of commodity costs, which is what contributed to the margin inflation in Q3 over 2, the outlook for that when I see Q4 versus Q3, is flattish to marginal inflation. Clearly in some parts of the commodity basket, whether it's aluminum, it's nickel, it's copper, we are starting to see an uptick in those cycles. Therefore, the big contributor of commodity costs Q4 over Q3, I do not expect to be there to the measure that we've just seen. Mix could take a bit of a hit if, you know, we are executing some of the plans that we have the function of where exports also plays out. Equally there will be opportunities on operating leverage as well.
It's a bit hard to forecast where that will come out at the moment. Our intention very clearly will be to try and hold margin at these levels. Just recognize that a large chunk of the commodity cost piece is reflected in the Q3 numbers.
Okay. That's, that's extremely helpful. Also if you could talk about pricing changes, in Q4 so far in the domestic and export markets. Have you done anything there?
There's really been no pricing between Q3 and, as of now. You know, very marginal uptick that we had in domestic, which was offset by some actions that we took to drive competitiveness in the export markets. On balance, absolutely flattish for Q3 and up till now.
Okay. Just 1 question if I can.
I request you to come back in the queue, sir.
Okay, sure.
Thank you. We have our next question from the line of Binay Singh from Morgan Stanley. Please go ahead.
Hi team. Thanks for the opportunity and congratulations for very strong numbers in a challenging quarter. 2 questions. Firstly, good to see Bajaj KTM partnership hitting almost 1 million units. How do you see the Bajaj Triumph partnership playing out? Do you think the opportunity size is as big as what you do on the KTM side? Any update on that? Secondly, on the Chetak having exclusive stores, could you share a little bit more about that? It seems, you know, like, will these stores be viable? You know, you have Bajaj stores, then KTM for biking, then Chetak stores, and then there are also reports that Triumph will also have its own dealership network. Will all there be on a standalone basis viable?
If you could talk a little bit about how you think about that. Thanks.
Sure. The Bajaj Triumph partnership, we are hoping to replicate the success of the Bajaj KTM partnership. Frankly speaking, at a global level from the inputs which we have received from Triumph and, of course, what we see as being the potential in India. When we put these 2 things together, we believe that the scale of the opportunity is bigger than the scale of the opportunity which we witnessed in the Bajaj KTM partnership. It's just that the segments we are covering are much larger in through this partnership. The products are now developed. They are under field testing both in the U.K., a few other countries, and in India. In due course of time, I cannot precisely tell you.
Like, we know where precisely we are launching it, but I cannot reveal the date as of now. We will shortly be announcing our plans in the market very soon. We are now very firm. We have got into the countdown mode, and we are sort of working on an operations, front end operation basis also. The this was a decision about the Chetak exclusive stores. We had to sort of think through this a little bit, keeping in mind the adoption rate of the EV is a bit forward-looking. We must agree that the rate of adoption of EVs in the last 6 months or so has been very good.
I mean, today, forget the low speed ones, but if I just take the high speed scooter, they are already in December clocking 20% of the scooter market. In some cities it is more. That gives you a very, very decent volume on which to build a network. We, of course, have got an aggressive market share assumption over there. Not immediately, but over a period of time. The idea is that, you know, parking a scooter in 1 corner of the largely ICE offering in a motorcycle store is a very sub-optimal solution. We said now that the business viability is seeming sort of attainable, we should. We are having no problem getting a request.
In fact, we have a lot of our network is very, very happy to put these standalone stores. We feel like, you know, we should take this opportunity to not just put these standalone stores, but the manner of these standalone stores, they should be more digitally enabled, which will give a much better customer experience, and particularly on the service side, where they should be much better equipped to allay service anxieties. It is correct that even in Chetak we will attempt to do this. This will put us in a very good state, you know, as the market unfolds over the next 2, 3, 4 years. This will put us in a very good state to manage the customers, to manage the customer experience, well.
Thank team. Both are lines of white space opportunities for Bajaj. Best wishes for the future. Thanks for that.
Thank you. We have our next question from the line of Pramod Kumar from UBS. Please go ahead.
Yeah. Thanks a lot for the opportunity, and I think, congratulations on an excellent set of operational numbers. My questions are related to market share. First on the EV side and then on the ICE side here. On the EV side to begin with, what we've seen in the last few months is a massive churn in the tier 2 category, right? What we're seeing is some of the tier 1 brands are racing away with market share, be Ola or Ather or a TVS, right?
In that context, Bajaj kind of stands out with a pretty flattish market share in the last few months, and not being able to kind of capitalize on this opportunity where customers are looking beyond the tier 2 brands as they get challenged on either battery quality or subsidy is getting challenged or whatever the reason, right? What explains this quite what do you say not so aggressive ramp up given the fact that you've got everything to gain and nothing to lose from the EV transition. Rakesh, if you can help us understand what is holding us back on the EV side? Because for context, Ather has market share which is like hitting 30% as we speak, with a reasonably high price point and a very limited reach.
Yeah. Pramod, first of all, I disagree that market share is the metric to evaluate an emerging business. We have said earlier that we are not looking at. We don't have a volumetric ambition at this point of time. We are first driven by building capability. This has got to be a marathon, like I said. I mean, we have got 800 stores. I can park a Chetak in each 1 of the stores, drop the price. It will not even affect my deep pockets compared to other competitors. Even though, we don't have private equity dollars to burn, we can drop the price and capture whichever market share we want. Is this the right way or are we building the capability? What are we building the capability?
We are building the capability for being able to launch a portfolio of products. We are building the capability to bring the cost down, to prepare for a scenario where subsidy is less. Today, you know that we have got, I mean, there is a INR 45,000 subsidy just on FAME. There is PLI, there is GST. This in 1 way is an artificial support to the industry. What happens if the subsidy is halved? What will we do at that time? What will we say to our vendors? What will we say to our dealers? We want to make our business foolproof it from subsidy. You know, I think there is a little bit of deja vu here. I'm seeing a parallel.
If you rewind 10 years back when we were launching the export offensive in Bajaj, at that point of time, the export incentives were 15%. We said, "We are building a business dream." There was already noise in the system. The government was saying that we want to reduce the export incentive. We had started to take our prices up in export markets even before the incentives were withdrawn. We started to look at pro-product configuration, preparing for a scenario. That is why, you know, foreign exchange devaluation helped us. The point everyone forgets is that 15% or in some markets it was 17%, incentives got reduced to 2%. Still the export business, even if I net off the foreign exchange gains, the export business has maintained its EBITDA percentage and it helped.
A similar situation is bound to unfold over 2 to 3 year period. The way to mitigate that is not to act at that point of time when it occurs, but to start preparing for it now. That is the work which R&D and all have been doing, and we feel that we are in a very good position now to start to expand our portfolio. There was no reason for us to go helter-skelter and, you know, just grab some market share. In fact, the investment in the stores, there is a far greater investment in setting up these stores, both in terms of management time, effort, dealer time, dealer investment, our own investment, et cetera. We are drop steady. You will see in FY2024 the outcome of all that preparatory work which has been going on for the last 12 months.
The expansion of the R&D manpower, the infrastructure, the, you know, discussions with vendors, supply chain, et cetera, which on a sustainable basis will allow us to expand the portfolio. Therefore, I'm not bothered about this market share bit. I think the idea going forward would be just think it's a marathon. We don't want to be sprinting right ahead and exhaust ourselves before the industry really shapes up. We don't want to be a straggler so that when the marathon is reaching an equilibrium, we have a lot of catching up to do. We are happy to stay somewhere in the front middle, make sure we build our capability and spring into action, at the right point of time, which is not very far off, by the way, you will start to see that happen next year.
Next financial year, I mean.
Thanks a lot, Rakesh, for that comprehensive response. The 2nd question, Rakesh, is on the export side. It is actually good to hear that you both, you and PVF are hinting that export retailers have kind of started to bottom out and inventory correction has indeed taken place at the industry level. By when can 1 expect exports trajectory to start improving in a reasonable way? Not exactly kind of being flat for timing, but when do you see meaningful pickup in export pulses, the way given your extensive experience on the international market?
I think it's gonna take till May or June, you know, that time. Then I think the pendulum will really swing because we have been through this cycle before and that is why, you know, the learning inside the team is that forget about the numbers, just go put in the new products, put in the, you know, keep continuing with the channel work, et cetera. When the pendulum swings, we'll be in a very, very good position to capitalize on the resurgence. See the demand side, though it has got severely impaired, but over a period of time, people digest new prices and they start to move on because at the end of the day the key drivers of the demand are intact. The demographic is young in Africa. Road network is increasing. Urbanization is increasing.
People, the public transport network is very poor. All those drivers which point to, you know, doubling of the penetration in the next 5 to 7 years are very much present. We have got a great market position. After this interruption, hopefully people will digest the new prices and, like you yourself mentioned that phenomena has already started to witness it that there's bottoming out and a slight climbing up. Like I said, we are facing stock outs in 1 or 2, in a few countries. However, the availability of dollar is still a concern. The central banks being very cautious in many countries and, conserving foreign exchange is still a concern. These things will take time, hopefully.
I really can't, I don't have any way of saying that when the if the Fed goes and does something and which again destabilizes the market, so who's to know? There is this special event in Nigeria which is the elections, et cetera, which I already mentioned, which is a very large market for us. That's some volatility. Hopefully that will settle in by March end or so. If the dollar position sort of, a lot of the banks are saying that, you know, we will now see a sort of reversal, when it comes to the strength of dollar. If the dollar position starts to ease off a bit, we will see suddenly demand coming back. I'm sort of taking a view that's probably major.
Okay. Rakesh, just a follow on the Nigeria election. Is there going to be any change in the government stand given this political alliance comes into form, comes into government? Is there anything which can materially make a difference to the Okada market in Nigeria, based on the election outcome?
No, I don't think so. I think, you know, the Okada has a very strong World Bank and that is not going to make a material difference. It is just a peaceful transition of power which is very important. Right now, you know, there is all this, people can't get out on the streets because there is a lot of civil unrest, so there's no traffic. Of course there is a demonetization. All that is swirling around.
Thanks a lot. Thanks a lot and best of luck. Thank you.
Thank you.
Thank you. We have our next question from the line of Mumuksh Mandlesha from Emkay Global. Please go ahead.
Thank you so much for the opportunity, sir. Sir, if possible can you share the Chetak EV subsidy financials for the quarter? Sir, from when will you get the PLI scheme benefit, sir? Has the accounting started for this incentive, sir?
Okay. Let me take the 1st question. Chetak financials will be available to you in the nextSure. This is when we typically do. you know, we've now migrated a fair amount of the volume in this last quarter from Bajaj Auto, which is where we are producing it, to Chetak Technology. There is some work that we are doing on that front. The materiality of the results will start to get reflected from the next quarter onwards and be reflected in the results that we put out at the end of the financial year, which is when all subsidiaries need to be reported. To your question on PLI. PLI, the claims will be made at the end of the financial year.
You're aware that PLI incentive of 13% is contingent upon the OEM being able to deliver a threshold investment. That investment for us is INR 150 crores this year. That determination of the investment will happen on 31st of March, post which the claims will be raised. The accounting for the PLI will happen in the next quarter when we have finality on the investment numbers.
Right, sir. Thank you for this. Sir, export revenues for Q3, sir?
Export revenues for Q3 are in the range of $415 million.
Thank you so much for the opportunity, sir.
Thank you. We have our next question from the line of Anand Venugopal from DNSDL.
Thanks for the opportunity. My question is, there is a lot of premiumization. Like, basically there is a lot of pessimism in 3-wheeler industry, India, and we realize it's an essential part of transport system. Do you think the market is underestimating the power of next upcycle in 3-wheeler industry? Can we see basically higher volumes in the next upcycle versus the previous upcycle?
No, I think so. I think the 3-wheeler industry is set to grow. It is recovering pretty smartly. It's not reached 100%, like I said, only 76% of pre-COVID levels. We are seeing big finance participation increasing more, not just from Bajaj Finance Limited, but we are seeing that retail financials are coming back and their willingness and the kind of schemes which they are putting out for the purchase of new 3-wheelers is also indicated. We are seeing public sector banks coming in and giving schemes. We are, these are also good signs. Like I mentioned in my opening remarks, the even better thing is the qualitative improvement in the 3-wheeler business, which is now moving from diesel to CNG.
The CNG product is better from an operating expense for point of view for the for the driver, which again is very helpful at the retail finance level. It is better for the OEs like us, where our you know, margins are far superior to the diesel products which were there. Of course it's a cleaner fuel. Yeah, the 3-wheeler business is I think in a very good direction now.
All good. Thanks.
Thank you. I now hand the conference over to Mr. Anand Newar, Head of Investor Relations for closing remarks. Over to you, sir.
Thank you, Yashashri. Thank you everyone for joining the call. Have a great weekend. Thank you.
Thank you.
Thank you, everyone. Bye-bye.
On behalf of Bajaj Auto Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.