Bajaj Auto Ltd (NSE:BAJAJAUTO) Q1 FY22 earnings concall dated Jul. 22, 2021.
Corporate Participants:
Rakesh Sharma — Executive Director
Soumen Ray — Chief Financial Officer
Analysts:
Binay Singh — Morgan Stanley — Analyst
Yogesh Agarwal — HSBC — Analyst
Kapil Singh — Nomura — Analyst
Raghunandan N.L. — Emkay Global — Analyst
Chirag Shah — Edelweiss — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Aditya Makharia — HDFC Securities Limited — Analyst
Priya Ranjan — HDFC Mutual Fund — Analyst
Presentation:
Operator
Good evening, ladies and gentlemen, and welcome to Bajaj Auto’s Conference Call to discuss the First Quarter Fiscal Year 2022 Financial Results. We have with us today, Mr. Rakesh Sharma, Executive Director; Mr. Soumen Ray, Chief Financial Officer; Mr. Sanjeev Garg, Vice President, Finance; and Mr. Anand Newar, Divisional Manager, Investor Relations. My name is Ayesha, and I will be your coordinator. [Operator Instructions]
And we’ll start with the opening remarks from the management.
Rakesh Sharma — Executive Director
Good afternoon, ladies and gentlemen, this is Rakesh Sharma here. Thank you very much for joining the call. Unexpectedly Q1 turned out to be a tumultuous quarter, which was not really expected when we were doing some forward-looking in Jan, Feb and even early March. But thankfully the pandemic peaked and started to recede, though it still remains a concern. Most of the country is now open with some restrictions on operating hours, as you know. But since, offices, education institutes and public places remain only partially open. Traffic is low and the restoration of normal retails is therefore higher in motorcycles and lower in three-wheelers.
We are hoping this improvement trend will continue, particularly as the vaccination program advances. Even through the peak pandemic, which is very intense and threat the country, particularly the North, supply chain demonstrated remarkable resilience based on the lessons from the first wave and coordination with local authorities was also much better, everyone has gotten our playbook, and this has allowed for continuity of operations, while observing safety protocols. Hence, the supply side is generally ready to service higher demand levels. Some issues persist like container shortages and poor visibility of semiconductor supplies. internationally, most countries, which we operate in, in Africa, LATAM and Middle East have returned to near normalcy. But the situation in ASEAN and South Asia, Nepal and Sri Lanka, a little bit in Bangladesh is still difficult. As you know, Philippines in ASEAN, Cambodia is a big market for us and they still remain closed.
I hope you have had some time to study our Q1 results, so I’ll divide my opening comments into two parts. First is the highlights of Q1. It’s difficult to compare this quarter with either the previous year or the previous quarter. So I’ll stay with just pointing out performance highlights compared to our strategic approach. And the second part is the near-term outlook. As you know, we have been driving the business on two fronts, ensuring that we have the agility to recover in key segments and overseas markets as the markets return to normalcy. And second is to grow share and margin by driving upgrading or premiumization within segments and across segments both in domestic and international.
So coming to the highlights of Q1. First, the domestic motorcycles business unit. Here, I would like to point out that our share in 125 cc plus segment of the top half, almost top half, which is 45% of the demand pyramid increased from 22% to 25% in Q1, a clear number two position in this very, very important segment. Now, this segment, the 125 cc plus segment accounts for almost 60% of our sales, while in the industry, it only accounts for 45%. Now this growth has been driven by Pulsar 125, where we have launched yet another variant in May, which is the Pulsar 125 NS, the most stylish, powerful and the most expensive 125 cc in the market. It has met with a good reception and along with the other 125 cousins. It has driven our 125 cc market share to an all-time high of 28%. It is 125 NS has also contributed significantly in lifting the EBITDA margins in that class. In them, half of the demand pyramid, which is the 55% of the industry, we continue to upgrade the customer to different ways. Always conscious that the customer here is more price sensitive.
So from KS, which is kick-start to electric start, from 100 cc 110 cc, from drum braking systems to disc braking systems, offering the customer very accessible and small step upgrade — upgrade opportunities. Here too, we launched new models, CT110X with a very bold style, met with a good reception, and Platina electric start, which is making electric start accessible to large number of entry-level commuters. Both these have contributed in driving our growth and share at the bottom half of the pyramid at an overall level market share in domestic business increased by 1.5 percentage points. And I would say that the quality of market share because of the share of the differentiated products, I would say the quality of the market share has also improved, and both are in line with our strategy.
In the domestic EV business, the three-wheelers return to normalcy, which had commenced from October last year and steadily we were adding 1,000 units per month to the sales was interrupted in April and May, because of the severity of the second wave. However, the retail outcome of June is a heartening. It is much lower than our previous FY’20 benchmarks. But it was much better than expected by us even in June, and we hope the trend will continue into quarter three and we will see a slightly faster recovery than we’ve experienced before in last year.
However, even though the volumes were lower, but there is an outstanding achievement here secured by the business unit, and that is that not only are we are an industry leader by a big margin, and we have always have been leaders, but the margin, the competitive ratio is now quite strong. Now, we have achieved leadership in every single segment, the small passenger, the big passenger, cargo, diesel, petrol, CNG, whichever way you cut the three-wheeler market, Bajaj Auto is a clear market leader now. Now, this puts us in a very good competitive position to take a disproportionate share of the recovery as it unfolds.
On the exports business, the exports has now continuously breaching the 200,000 per month level mark and it continues to perform robustly despite drop in sales in ASEAN, where Philippines, it’s a very big market for us. We have the number one position in Philippines. Cambodia, which is a huge three-wheeler market for us. Uganda, which is we’ve got a 90% share over there. It’s a big market for us in Eastern Africa. These are high volume markets. But they suffered lockdowns and a huge drop in retail, but despite that exports has come in with a 200,000 plus levels. Quarter one was our second highest quarter ever in our history of exports.
Our global market share is therefore estimated to have increased sequentially by 2 percentage point in motorcycle, and by 6 percentage points in three-wheelers. Here too, the share of premium motorcycles, which is Pulsar and Dominar brands moved up from 19% in Q4 to 21% in Q1, with the Dominar 250 making its appearance in many high-end markets like Turkey, Argentina, Colombia, etc., and Mexico and getting a very, very good reception. We now get over 85% of our revenues from markets where we are number one or number two. This is an important metric as I’ve been pointing out, we monitor it continuously as it indicates pricing power and our ability to manage competitive threats. Indeed, it is because of disposition that our pricing action to recover costs has been ahead of all the other Indian and Chinese competitors quite ahead of it. So the recovery of costs has been pretty good in these markets. Our exports to KTM continue to grow at a significant pace, 48% sequentially, followed by demand in the developed markets of North America, Europe and Australia.
Some other highlights, we faced strong headwinds of cost increases, which was known about 3.7% [Phonetic]. Of this, we could only recover about 1.5%. Keeping demand sensitivities in mind, the backdrop is really of economic hardship and a fragile recovery. So these guys, the cost increase recovery needs to be calibrated, with this in mind. And of course, we have to keep a close watch on competition. But we believe our price increases both in India and overseas were ahead of competition.
Margins are further hurt by the loss of operating leverage due to lower volumes by about 1.6 percentage points. This was a little bit of a surprise, because when we were entering quarter one, we did not realized that the second wave would be so severe, particularly in the North, which was experienced this generally has a mini season because of marriages, and that cost us about 1.6 percentage points of EBITDA. However, slightly better forex realization and better product mix mitigated these losses by about 1.3%, and this explains the difference between Q4 and Q1 EBITDA of 2.5%.
Other highlights, was Chetak bookings that opened in Pune and Bangalore. However, we have to close them in 48 hours as it was a very strong response and we felt we may not be able to satisfy the complete demand. Supply chain visibility on some of the imported components has improved. But still we are not getting longer term import certainty, though we see a strike rate of up to 1,000 units per month. Hence, further expansion has been planned but cautiously planned. We have announced entry into four mid-tier towns, Nagpur, Aurangabad, Mysore and Mangalore.
Now, coming to the near-term outlook in domestic motorcycles with near normalcy approaching in most geographies, we expect better retails compared to last year and last quarter. However, this may not translate entirely into billing, because as compared to the same time last year, stock levels are higher this year. Last year, stock levels in the channel were lower due to this transition from BS4 to BS6. And when the pent-up demand released itself in Q2, billing was not only servicing the higher demand, but was filling up the stocks in the channel. So billing was higher than retails.
This quarter — in this year in quarter two, we expect billing to trail retail. Hence, we expect the flattish due to compared to last year. For us, performance will continue to be driven by the 125 cc portfolio as well as some of the newer models in the commuter segment, which where we are offering little upgrades. We have repriced the Dominar 250 as a strategic investment to expand the quarter liter class, and we will be introducing the three new models in the sport segment as well as the commuter segment, which hopefully will inspire the customer to upgrade, which is in line with our strategy of taking the 100 kickstart customer to electric start, the drum customer to disc brake systems, the 100 cc customer to the 110 cc, the 110 cc customer to 125 cc, the 150 cc customer to 250 cc. We thought that it was important to make the 250 cc, though even volume play small, but it’s our investment to expand the sub segment.
Domestic three-wheelers, we expect a steady improvement, we should be in the tens of thousands and Q2 should be substantially better than Q1 and also Q2 last year. We anticipate the need for some closed listening with financiers to ensure that the recovery is supported by the availability of retail, finance, and this is a critical success factor in ensuring that there is a recovery in this segment. Internationally, we will continue our momentum and expect to hold the current performance level steady. If the COVID situation improves in ASEAN and the few other countries, which I pointed out, then this would be a bonus. But it may occur, even if it improves in August, by the time we see shipments that may occur in September or October.
On the cost front, there continues to be material-led cost increase of over 3 percent points, new pricing announced in early July, both in domestic and overseas markets recovers, about two-thirds of this increase, but there is still some work to do. We will evaluate the further scope as the quarter progresses and we understand how demand is rolling in. However, a better operating leverage we certainly expect Q2 to be better than Q1. Continued currency support and an improving product mix is expected to mitigate the cost increase situation that get leftover from the price increases, which we have taken.
With this, we can now open the floor to Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Yogesh Agarwal from HSBC. Please go ahead.
Yogesh Agarwal — HSBC — Analyst
Hi, thanks. Hope you guys are doing well. Just have, Rakesh, couple of questions actually on your second press release on EV, the spend on mobility, while it’s heartening to see spend going up there in absolute terms, which still quite small. So firstly, can you talk about the plans there? This investment is for R&D or for manufacturing? Is it to develop the supplier base? That was one.
And secondly, you talked about Chetak, is Chetak eligible for same benefits now, because it was a bit surprising that most of the other EVs are eligible and Chetak wasn’t earlier. So what’s been there? Thanks.
Rakesh Sharma — Executive Director
So, this is about the new EV company. Yeah. So I do not entirely grasp your question, but I think you’re asking about the announcement regarding the formation of the 100% subsidiary for EV. I think at this stage you should read it as a strong signal by the company in this announcement of ensuring that we have continued. We are a successful company in two-wheeler and three-wheeler mobility. We want to continue to be so, irrespective of whether it is ICE or whether it is EV. We recognize there is a need for agility, there is a need to hire better talent deployed in a different manner and to be possessed of a single-minded focus, which sometimes as a division and a large company can get diffused. We want to therefore create the corporate space to pursue aggressively our ambitions in EV. But exact playbook is being worked out, but it will have a substantive operation. I mean, all the operations relating to EV will be part of this company. And as and when the playbook is clearer and we have baked the whole story, we will be happy to share it.
Now, when it comes to Chetak, we, Chetak’s application for fame is certainly been — is with the appropriate authorities and we expect that to be cleared anytime now. The reason for Chetak not having the same benefit till now was because we prefer to be with a certain localization configuring which, while it took more time, but it allowed us to move to that configuration in one step, instead of trying to do two, three steps. And we just felt that from an operating point of view, it would be smoother and therefore, we did not have, we did not go in for the same benefit. However, we decided consciously to not let the customer suffer in this and the company sort of stepped in and provided and fill that gap, which obviously when we start getting the same benefits, we will regard the same benefits and go directly to the customer. So it’s very much on the cards now.
Soumen Ray — Chief Financial Officer
And just to add to what Rakesh said. Soumen, here. We have started the company with the authorized share capital of INR100 crore and a paid up share capital of INR5 crore, because you need some money to do the formalities. How much will be the investment? What we will do? That we will share as and when as Rakesh said, the playbook matures and we decide what all to do and what to do. And it is an situation to be communicated to you. But suffice to say, we really did not open a company to invest INR5 crores and run the electric vehicle business. So on this base, just let’s wait and watch, we’ll come back to you when we’re in a situation to share more details.
Yogesh Agarwal — HSBC — Analyst
Very well. Thank you so much. Thank you.
Operator
Thank you. The next question is from the line of Binay Singh from Morgan Stanley. Please go ahead.
Binay Singh — Morgan Stanley — Analyst
Thanks team for the opportunity. Just a follow-up from the comments that Soumen made. By when do we expect more details on that? Because when we look at competition, they’ve announced tie-ups or they’ve already announced their capex target. By when do we expect Bajaj to make these announcements?
Soumen Ray — Chief Financial Officer
So, I would — I really do not know, me just telling you a number of either INR200 crores or INR2000 crores, how does it make a difference, because unlike some of the other people, we don’t need to raise money. We are sitting on INR15,000 crores of cash. So setting up a factory, we don’t need to go to people to ask for either debt or equity. So I will say, we are preparing plans. We will decide how things happen and we’ll inform. What I don’t want you to miss out the fact that an organization, we did not have any domestic subsidiary has chosen to focus on EV and start a 100% domestic subsidiary. That is the first step. So let’s wait and watch the space. We’ll certainly we understand the interest and obviously a company of our size and structure has not just gone in with its eyes closed, just generally to see what happens. Wait and watch, there is a reason why we are not sharing so much. We’ll share as and when things cook up, they are cooked well and there is — they’re mature, which is worth sharing.
Binay Singh — Morgan Stanley — Analyst
Right, right. No, the reason we ask is that capex tend to lead our product development, which tends to lead model launches. So just hoping that the company is aggressive enough on this segment.
Rakesh Sharma — Executive Director
Yeah. So that — yeah, Binay, that kind of effort is already underway. And we have a huge R&D accreditors, and we are collaborating with KPN. We are collaborating with vendors. We are studying the market in micro-mobility segment with — we have made investment in Yulu and we are looking at their vehicle, we are looking at high performance electric motorcycles and everything in the middle. And there is a substantive R&D effort already underway. See, we feel that, you know, this whole manufacturing investments which in the past people have been talking about and which has been stoking some kind of an excitement. Frankly speaking, passes us by, because we don’t get very excited about it, because we set up these plants, very, very simply and easily. You know, we announced some INR600 crore, INR700 crore investment just for KTM, Triumph and other high-end bikes of Bajaj, a little while ago. So it’s not a very, very big issue in our minds. We are the resources. We have the engineering capabilities. We don’t think that is something, which is important to stand up and really start talking about. But yeah, I agree with you that what is more important is what will be the product portfolio, how we will engage with that customer. And on that, we are writing the script and when we can share, we will definitely share our plans. But right now suffice it to say that there is a huge amount of focus internally in this area. And we are getting into a position so that we can move very nimbly. Yeah.
Soumen Ray — Chief Financial Officer
Just to add to what Rakesh mentioned, Binay, what is not visible because we have INR30,000 crore company. So whatever INR300 crore, INR400 crore, INR500 crore we spend on R&D is not visible, because R&D is a lot of manpower cost, people cost. We have a 1,400, 1,500 headcount R&D. So a lot of — so when people see I’m putting capex on R&D, some of these expenditures are revenue expenditure for us. It is already baked into my P&L, it doesn’t become so obviously visible. So essentially what we need to spend is on putting up a factory. On R&D, we do not need to spend like $50 million or $100 million.
Binay Singh — Morgan Stanley — Analyst
Right, right. I take the point, it’s very encouraging to hear all the stuff. We are aware there’s a lot of investor discussion on this that — now similar to the gasoline segment, which later on became very competitive and became very difficult for companies to enter and establish themselves. In fact, Rajiv Bajaj often talked about that lead to strategy, doesn’t work. So the only fear is that if some company very late in launching electric vehicle, then that segment will also get a little commoditized. So it may be difficult for late comers to establish themselves. But nonetheless we’ll watch for updates from your side.
My second question is on the gross margin side. How do we see gross margins moving from here on because it’s most likely that the domestic share will increase and the overall exports will go down. And in that sense, where do we see, but at the same time, you will have three-wheelers rising. How does the management look at gross margins moving from here on?
Soumen Ray — Chief Financial Officer
So I’ll give you two answers, Binay, I think and this is a question which would be bear in the minds of lot of people. So I’ll take a couple of minutes. So there are some headwinds or some categories. I’ll first tell you then and then I’ll show what do I see as a net of that. The first tailwind that we will have is hopefully this quarter, the operating leverage will come back. I will not be a INR7,000 crore per quarter company, I will become a INR9,000 crore per quarter company. So clearly that leverage comes up with improvement EBITDA, not gross margin. On gross margin, we have, as I mentioned — as we have mentioned in the press release, we have under recovery between cost and profits. In Q2 also we will have an under recovery. So the cumulative under recovery will increase from Q1 to Q2. Having said that, the only good thing that can happen is if there is some forex, if the rupee depreciates further, we will get some more money. The mix will tend to get adverse. You’re absolutely right. But as Rakesh mentioned in his opening remarks, let’s wait and watch how much, because as of now the pent-up demand coming back has not been as fast as it was last year. So let us watch and watch how the mix plays out. But directionally will the margins possibly be a little softer? I really do not know. But we have to bet between better or softer, I would possibly bet around being softer.
Binay Singh — Morgan Stanley — Analyst
Great. Thanks a lot, sir. I mean, that’s very helpful. I’ll come back in the queue.
Soumen Ray — Chief Financial Officer
I mean, just to end the conversation. Then the question would be, will the industry now come down to this 15% range of EBITDA? The answer is no. Because clearly at these levels of steel prices, the near-term steel demand will not get impacted. But the longer term steel demand will get impacted. For example, I mean, there’s been articles around the builders are taking up prices of their flat by 10% for new bookings. So water will find its own level and steel prices will unwind. But for the temporary period, yes, we have a problem, certainly in industries where steel and such metals are in large part of the product. Thank you. We’ll move to the next question.
Binay Singh — Morgan Stanley — Analyst
Right. Thanks so much.
Operator
Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.
Kapil Singh — Nomura — Analyst
Yeah. Hi, sir. Thanks for the opportunity. And Rakesh sir, thanks for the opening comments. They answered part of the question. On EVs, I just wanted to understand from you, what is your thinking on how electrification will evolve in scooters, motorcycles and also three-wheelers? How far do you think it’s going to be? Do you think that the recent government actions in terms of subsidies, which are coming to would accelerate the shift towards the news in all these segments?
Rakesh Sharma — Executive Director
Yeah. So directionally, I think it’s very clear that the industry is headed towards more and more of electrification. But in spite of the heat and dust, which is being churned off over here, the transition will not occur — the transition will not occur suddenly or immediately. India is a complex country, India is a large country with lot of diversity. Even if you take developed countries for the four-wheeler category, whether it is the US, It’s a Europe, Australia, Japan, you have to just see the progression of the penetration of EV. Yes, of course, directionally, the world is headed that way, but it is going to be a gradual transition. Therefore, somebody commented on first-mover advantage. I don’t think the jury is out still whether there is a first-mover advantage or a disadvantage, because the consumer is going to evolve, the technology is going to evolve, and you have to harness all that. So I believe that if I take a consensus of consensus, it’s about three to five years, where we will start to see EV is becoming a significant portion of the two-wheeler, three-wheeler space. A lot of it rests. The government has shown its hand by backing it up. But still the acquisition cost, there is a gap between a substantial gap still between the ICE scooter and the electric vehicle scooter. Now, government is planning a part of it, but still there is a substantial gap. Yeah, some people will have the ability to plug this gap further by using private equity money and all that. That’s fine. It will help towards evangelizing the category. But it will take time for it to resolve, because there is a second issue, which is a second in my mind, but nevertheless it is there. It is about the range anxiety and the anxiety of adopting a new category.
One point which I want to emphasize, which has been a very, very important point in our structuring of our planning is that you don’t want to give a bad experience to a customer who’s standing in the front of the queue to convert from ICE to electric. He or she should not feel that they’ll be made a sucker out of by having operating problems. So the ability to give a friction-free smooth operation to the customer, the ability to ensure it is very well supported, the customer is very well supported, every customer is not digitally savvy and cannot work out the touch screens, etc. At that time, the company has to be there present through its service network, service people and engagement with the customer, with systems and processes. So that the customer has not finished and you get positive word of mouth, not just for your brand, but for the electric category. I mean, if I — we don’t want to — we don’t want this to get stuck because we’ve faced this, for example, in developing the three-wheeler category in many parts of Africa, because we can’t supply the spare parts, we damage the category for a long time. I won’t tell you the names of the country. But we’ve gone through that experience. So I feel this is a very, very important. It’s not just about given the cheap price and throwing some two-wheeler and the world is waiting to convert. They may buy, but there may be a problem later on. So I see that all these things when you roll in, what kind of experience the customer will get, how the costs and prices will move, toll prices are moving up. I definitely see a 3 to 5 year period when the transition will occur. And this is a period where we want to make sure that we have a strong customer connect. We have strong customer understanding, so that we can segment the market of a proper product backed up with proper service. We feel ultimately the game will be back to style, design, performance, price and all of this packaged under the trustworthy brand.
Kapil Singh — Nomura — Analyst
Thank you, sir. Very detailed answer. Secondly, on the exports, could you just comment, we’ve seen COVID cases rising in some of the nearby countries and also some countries in Africa. So is the demand outlook still similar or is there any significant change from that 2 lakh per month kind of number? Also, you’ve talked about container shortages of late, so is that still continuing? Or has that resolved?
Rakesh Sharma — Executive Director
So the — like I said in the opening remarks, our current estimates are based on how the markets which are open right now. And like I said, the — COVID is a big problem still in ASEAN. Retail is very badly impacted in Philippines, Malaysia, Thailand, Cambodia, Myanmar. Out of this in the ASEAN countries, Philippines is a very important market for us both for two-wheelers and three-wheelers. Cambodia for three-wheelers. And this is dampening the performance to some extent. Also one or two countries in Africa, mainly Uganda. And I think a country order in Latin America is where we are still facing these problems. So — but the performance, that’s why it’s quite exemplary because it is despite these key markets holding us back. So hopefully the pandemic recedes in these places, we’ll be able to strengthen our export performance further.
Container shortage is now a way of life and — I mean it is at this point of time, yeah, there are always slippages, but it is affecting us in terms of taking up a lot of management time. And secondly, increasing the costs because the container goes up from $2,000 to $10,000 to Colombia, and you’re shipping 150 vehicles. You can see per vehicle, there is a big incidence, of course. We use 33,000 containers every year. So it’s a big exercise for us. But now it’s a way of life. We are just learning to manage with it.
Kapil Singh — Nomura — Analyst
Okay, sir. Thank you so much.
Operator
Thank you. The next question from the line of Raghunandan N.L. from Emkay Global. Please go ahead.
Raghunandan N.L. — Emkay Global — Analyst
Thank you, sir, for the opportunity. Couple of questions. Firstly, on the electric side, three-wheeler operator seems to be sticking to CNG vehicles instead of EVs, possibly considering range or charging [Phonetic] anxiety. What factors do you think could be necessary to trigger a shift towards electric? Also, any timeline for the three-wheeler launch?
Rakesh Sharma — Executive Director
So that is a very good observation, and we have been struggling to establish a business case for electric Pierer opposite the CNG. The CNG footprint in the country is increasing at a very good pace. Our market share in CNG, ours between 85% to 90%. One of the big drivers for even this little growth which we have seen between April, May, June and now what we are experiencing is driven either by the conversion of diesel vehicles into CNG or by cargo vehicles. And this drive of the government to bring the network of CNG is a very significant drive. They are wanting to open 9,000 pumps by 2025. Today, there are 1,500. Every addition of every 100 pumps, pump stations, I mean, creates a market of 10,000 three-wheelers for the industry, out of which 90% comes to Bajaj Auto recently. So it’s a move we are completely backing. It’s a very clean fuel. There is a sliver of a advantage for electric three-wheelers if it all depends on the electricity price in the state. But — and the customers, if the pump is running good pressure etc., then the drivers actually prefers CNG. So it’s not going to be easy to change CNG-powered vehicles, which are going to only increase into three-wheeler. Irrespective of that, we are going to put in a similar and which is under testing like I’ve been saying, it’s, I mean, many parts of the country. And hopefully, we should be able to launch it by end of the year. I mean, end of the calendar year.
Raghunandan N.L. — Emkay Global — Analyst
Thank you, sir. My second question to Soumen. A couple of things actually, there have been media reports indicating possible increase in outlay for RoDTEP scheme, any thoughts on when these export incentives could recommence because that can be a margin trigger. And secondly, employee cost was on higher side at 3.6 billion compared to average of 3.2 billion in last four quarters. Any one-offs and what could be the sustainable rate ahead? Thank you.
Soumen Ray — Chief Financial Officer
I’ll answer the second part first. So if you see last year, you would see that in Q3 and Q4, our employee costs have come down. So we achieve certain terms of reference for retiral benefits, which are led to certain reversals. So that INR3.06 [Phonetic] crores of March of Q4 of last year is more like a 3.30 [Phonetic] kind of a number 3.25, 3.30 kind of a number. Now that we obviously last year there wasn’t increments, which were given. This year, we have announced our increments and it is effective from 1st of April. Also what has happened during the pandemic, obviously, the number of deaths have increased compared to what it was earlier. And we have a few insurance policies, which covers employees on the time of their untimely death. The premiums of those policies is really shot through the roof. And I’m sure you will keep on hearing this more and more in every analyst call irrespective of industry. So these are primarily the reasons. You can take the current as a steady-state rate, because we have given increments. I mean, the insurance will not be there, something else will be there. So you can consider. I don’t think you would want to bother for the last INR4 crores, INR5 crores. So this is a steady state rate that you can issue.
On the first question, if you know you tell me, I am looking at Rakesh and asking him if this answer can be given. We can only say, yes, it is additive. Yes, there is a cumulative benefit, which is waiting from 1st of Jan because that is what the announcement was. However, I have yet to get last year’s MEIs and so on and so forth. But I don’t know when. So I didn’t have an update.
Raghunandan N.L. — Emkay Global — Analyst
Thank you, sir. Thank you so much. And let’s hope for the best.
Soumen Ray — Chief Financial Officer
Thank you.
Operator
Thank you. The next question is from the line of Chirag Shah from Edelweiss. Please go ahead.
Chirag Shah — Edelweiss — Analyst
Yeah, thanks for the opportunity. Soumen, just one housekeeping question. If you can share the export revenue and the USD realization for the quarter?
Soumen Ray — Chief Financial Officer
We know that. So we have kept it very — the export total revenue was about INR4,500 crores and in dollar terms what we sold — sell in dollar, it was about $580 million.
Chirag Shah — Edelweiss — Analyst
Thanks. Soumen, there is a follow-up on the USD realization, sequentially there should have been benefit for us, right, in the quarter or at least 40, 50 bps on account of better rate. Has that materialized? And how do we look at it going ahead? What is the broad range forwards that we have?
Soumen Ray — Chief Financial Officer
So, Chirag, I cannot give you the numbers of what is the range forward that we have. But if you look at the press release that we have given, we have mentioned that we have benefited but because of the forex rate. So we have benefited closer to a percentage point, one pp because of forex.
Chirag Shah — Edelweiss — Analyst
Okay. And if you look at the last quarter in general, you are —
Soumen Ray — Chief Financial Officer
This is — one, this is vis-a-vis Q4 of last year. Yeah. Yeah. Sequentially. Yes. Sequentially.
Chirag Shah — Edelweiss — Analyst
Similarly, if you look at the Q4 of last year, sequentially, we were hoping that most of the commodity pressures would play out in Q1. But if I understood correctly, you are further indicating the 3 percentage points raw material cost pressure is happening in Q2 also. Is it the right understanding?
Soumen Ray — Chief Financial Officer
So I do not know the percentage because things are still fluid because conversations and negotiations are going on. But will we see a further pricing material cost increase in Q2, the answer is the unequivocal, yes. And this is not something only with Bajaj Auto, the entire industry will see it and that is why you’ll see there is a price increase, which has happened in almost all players effective from beginning of July. So everybody in the two-wheeler industry and also if I remember correctly, three-wheeler industry have taken up prices effective 1st of July, which is because the cost increase impact was not entirely felt. So last time when we spoke, there was a hope that Q2 will be muted. The reality has not turned out so. Q2 is as strong and as aggressive as Q1 was incremental.
Chirag Shah — Edelweiss — Analyst
If things are normal, it will stabilize where they are, probably this is the last quarter where there is huge under recovery and from here on things should normalize.
Soumen Ray — Chief Financial Officer
I’ve just mentioned in the other — in the previous call. So I have now dropped from INR9,000 crore quarterly top line compared to INR7,300 crore. Once I go up to — if everything goes normal, which is what the view is sitting today. I should get that to INR9,000 crores a quarter on an average.
Chirag Shah — Edelweiss — Analyst
I was referring to this commodity pressure and the pass-through side —
Soumen Ray — Chief Financial Officer
Okay. So commodity pressure, Q1 there is a under recovery, Q2 there is a under recovery. So cumulatively, there will be an under recovery. Now, will steel prices go up further? Frankly, I have no idea. In nine months, steel prices have gone up by more than 50%. I don’t think I’ve ever seen. In my 23 years, I’ve never seen a commodity go up by more than 50% in nine months, other than oil. So I really cannot comment whether Q3 how it will be, because today Q3 we have zero visibility.
Chirag Shah — Edelweiss — Analyst
Yes. And one question for Rakesh. Can you update anything on new models that you intend to launch, maybe a big platform upgrade in any of the brands, because there were expectations that next 12, 15 months, a lot of action is likely to happen from Bajaj Auto’s table on the platform change or maybe even there is buzz of a new brand launch in 125 cc category. So if you could share some more light, it will be helpful?
Rakesh Sharma — Executive Director
Well, you will see what — now, September onwards substantive a new platform and some substantive upgrades right till in the next 12 months there is a calendar where you will just continuously see this both in the sports and the commuter segment. In the next 9 to 12 months, we don’t anticipate putting in a new brand. These will be housed within the same brands, which — of our existing portfolio of brands.
Chirag Shah — Edelweiss — Analyst
These are really helpful. Yeah. Thank you and all the best.
Soumen Ray — Chief Financial Officer
Thanks, Chirag.
Operator
Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Hi. Soumen, can you share USD-INR rates for the quarter, which we realized?
Soumen Ray — Chief Financial Officer
About INR74.25. [Phonetic]
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
INR74.25. Okay. Second question, pertains to this new subsidiary, would it — would we be shifting this new capacity which you’re putting of INR650 crore into this or which would be pure EV only?
Soumen Ray — Chief Financial Officer
Which 50 crore?
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
INR650 crore investment which are going forward.
Soumen Ray — Chief Financial Officer
No, no, no. The Chakan facility is dedicated to high-end sports bike, catering to KTM Husky on whenever we start manufacture of client’s plant. That facility has got nothing to do with electric vehicle as of now.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. Okay. And last question pertains to clearly those parameters [Phonetic], we are indicating some bit of positive traction on the three-wheeler side. However, the Bajaj Finance in their call couple of days back indicated large stress on the three-wheelers brand. I mean, almost 19% GNPA and in two-wheeler, three-wheeler portfolio, largely driven by three-wheeler. So how do you see the financing side impacting three-wheeler recovery?
Rakesh Sharma — Executive Director
Yeah. So a lot of the impact is from the old book. What I’m really encouraged about is the progression, which has taken place before the second wave and then off late in June etc., where with the new financing norms, still we are seeing. For example, I’ll tell you, we were expecting 5,000 retails in June but we ended up with 7,000. Still middle of June, we were thinking we’ll hit 5,000. But it — and these are retails, this has got nothing to do with stock. And we are slightly up to our forecast to the plant for the month of July and which till now is tracking pretty well. Now, these retails are occurring with the different financing norms. A lot of the hit to the financing company is from the period of before the first morat and what have — what are the aftermath of the morat etc., which of course the financing that we have to now factor in and we have to work very closely with them through our dealer network also in attacking the right segments in helping them with all the information, which they would want to assess risk much better, and it can be done because there are buyers which are coming back. The financing companies themselves are very keen to improve the denominator also. So I think they are a critical success factor, but we will have to work closely with them in managing and supporting this recovery.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
So we don’t expect financing as well as a stumbling block for recovery in three years?
Rakesh Sharma — Executive Director
No, I don’t think that financing will withdraw, because there is — including Bajaj Finance, there are lot of financing companies which are there, out there in the free. And, but, yeah, the way we give finance, there may be bottom slicing of the more risky ones, there are distribution partners for financing, those might get hit and stuff like that. But financing, probably, after this will become more mature and more robust, but it will be in play and we’ll have to work closely. No doubt, there are a critical success factor, but it’s not a zero-one situation.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Sure, sure. That’s interesting. And just one clarification, you’ve shouted out the CNG ramp up. So for every 100 pumps, you said there’ll be 1,000 three-wheelers required will give —
Rakesh Sharma — Executive Director
For every 100 pump stations there will be 10,000 new three-wheelers. I mean, this is a thumb rule, somewhere it can be more, somewhere it can be less, depending on the size of the pump and a lot of — there is a issue about how much pressure there is and all that. But yeah, it is — so what happens is that when the pump come and CNG is a clear INR1.25 per kilometer better than diesel. So what happens is, if I’m owning a diesel vehicle bought from, let’s say, competitive brand because their competition is slightly — used to be slightly better in diesel and it is flying for about 3, 4 years. And I see another guy who is earning much more or saving much more because he is on, got on to CNG. There might be an acceleration. I might not keep the old diesel vehicle for 5 to 7 years. I might just change from the diesel vehicle into the CNG vehicle. And these vehicles then get collected and they’re resold in markets where there is no see CNG as secondhand vehicles. We are seeing this kind of a pattern. And then they come to us. So it’s — so wherever the CNG pump comes, it creates a very good opportunity for us. It’s on an annualized basis, which I said.
Operator
Thank you. [Operator Instructions] The next question is from the line of Aditya Makharia from HDFC Bank. Please go ahead.
Aditya Makharia — HDFC Securities Limited — Analyst
Yeah. Hi. Just wanted an update on the Triumph for JV, where are we in terms of timelines for the launch?
Rakesh Sharma — Executive Director
So let me just correct you, it is not a joint venture, it’s just a — it’s a alliance. We have — it’s a strategic alliance without equity participation. So this partnership has actually got really hit by overhead because travel was not possible and we are in the stage of having made prototypes and required physical presence to correct the prototypes, the clay models, then the prototypes. This whole process is taking time. We expect by the — probably towards the end of FY’22, ’23 to present the product in the market.
Aditya Makharia — HDFC Securities Limited — Analyst
So there will be a delay of about 6 to 9 months based on what you’re saying.
Rakesh Sharma — Executive Director
Yes, yes. Based on what we had indicated earlier. Yeah.
Aditya Makharia — HDFC Securities Limited — Analyst
Okay. And just a second question. A slightly broader one you have mentioned that the recovery in two-wheelers is more K-shape with the bottom of the pyramid customer being impacted. Do you expect this to continue or do you think now with COVID unlock happening, things would change?
Rakesh Sharma — Executive Director
See, in the immediate term I see that in the rush of the pent-up appetite releasing itself, we will not be able to separate the noise in the system. But once it settles down, I see that the bottom section of the society has got considerably weakened economically, because the self-employed people, the tradesmen, the people working in restaurants, bars, etc. They have their savings and all have got quite diluted. And we are seeing that there is a lot of weakness of purchasing power over there. The salary clause and slightly better offer come out almost unscathed from the pandemic, because you know there was earlier a lot of fear that people will be laid off, salaries will be reduced. So there is not — so economically, they’re a bit — they were not as since. And secondly, the security of fear of job losses sort of disappeared. So because of these reasons I see that the upper half of the demand pyramid or the upper three quarters of demand pyramid will probably continue to do better in the, let’s say next 12 months, forget the next three months, that will be a lot of pent-up demand. And the bottom quarter or bottom curve is going to drive the recovery of the industrial base.
Aditya Makharia — HDFC Securities Limited — Analyst
Got it. Thanks so much.
Operator
Thank you. The next question is from the line of Priya Ranjan from HDFC Mutual Fund. Please go ahead.
Priya Ranjan — HDFC Mutual Fund — Analyst
Yeah, thanks. So my question is on your new subsidiary. So when this new subsidiary gets created, then the entire R&D structure of your, I mean, electric mobility, which is sitting in the Bajaj Auto will that get transferred to this entity? Or I mean, it’s still not clear?
Soumen Ray — Chief Financial Officer
So Priya Ranjan, as we have said, we have said whatever we could in the press release. It’s a very evolving space. We are adapting to changing scenarios. We will come back to the investor fraternity and media at large about when we are in a situation to share what we will exactly do in the new subsidiary. I understand that the need of wanting details, but I am humbly submitting that at this point in time, we would not like to share.
Priya Ranjan — HDFC Mutual Fund — Analyst
Sure. Okay. And just on the product development cycle. So if I say from, say, design to the launch, if the ICE engine motorcycle or ICE engine scooter was typically taking say 1.5 year or 2 year. So what will be the commensurate launch? I mean the, from say design to launch period for say electric scooter from your point of view?
Soumen Ray — Chief Financial Officer
Priya Ranjan, this is a question which I don’t think can be answered, because there are multiple things. On one way to look at it is that battery technology that we’re using in one is immediately retrofittable in the new model, then it comes down. However, if you are looking at different performance measure from the newer vehicle, then a new battery has to be configured. But I would like to believe that at this point in time, it would be directionally longer than ICE vehicle. But if the battery interoperability is established between two innovation models, when the time can be cut down. But can I give you a 3.5 year or 1.5 year. The answer is no.
Priya Ranjan — HDFC Mutual Fund — Analyst
Okay. Okay. And in terms of your — I mean, you said there is around 1,500 employee in R&D side. So is the R&D team joint, or is it, I mean, both the teams are different? And is there any hiring, different hiring policy for them?
Soumen Ray — Chief Financial Officer
Just repeat your —
Rakesh Sharma — Executive Director
No, mostly R&D is one consolidated R&D, it has got horizontals and verticals. It’s organized on the basis of technologies and it’s organized on the basis of product segments. So as and when a project gets underway, a Matrix team is formed and it pursues that project.
Priya Ranjan — HDFC Mutual Fund — Analyst
Okay. And lastly from Rakesh, is on the export front. So we have seen some kind of market share loss, say, probably than West Africa. So I mean, what are the steps we are taking to address that if we can answer that?
Rakesh Sharma — Executive Director
So, I would say that, yes, there is a — I mean, if you take the largest market Nigeria where in West Africa, where we even now have 50% plus market share. And yeah it has moved down 3 percentage points, 4 percentage points. And a lot of that is to the Chinese where we have seen particularly in the last 12 months. Let me just think, yeah, since March ’20, when we were reeling under COVID in that April onwards period, the Chinese companies, the ports etc., had bounced back and they had sort of yield the initiative and they have come back. They continue to operate as do some Indian exporters on the basis of price. We don’t want to go down that track and our whole objective, let’s say, if I just keep to be illustration of Nigeria is that there is no shortcut to it except to deliver an outstanding customer experience, and we have invested heavily, heavily in service network in engaging with the customer in product quality and having constant engagements with the customer, and attending to quality complaints or any issues with the customer faces rapidly. Today, thanks to digitization. If there is a complaint experienced by the customer and it comes to the dealership, within a few hours it is known, our CTO one sitting in a pool, he wants to look at the complain, he can look at it. But certainly under him, there are teams which can immediately swoop down on this issue. I think that it is things like this, the product quality and customer experience, which will create a more for us and which will allow us to conduct this business at a respectable margin. It is impossible today to run the business sustainably for a period of time and drive scale in it at prices which are similar to Chinese prices. And therefore, we have not gone down that track. It gives some kind of a momentary relief. And this is things like working with wholesalers, throwing money and discount with wholesalers and securing some kind of volumes. That is the way the Chinese operate, some Indian companies also operate like that. But we have invested in our own network to deliver a customer experience. It’s a bit of a rocky road, but I think it’s more sustainable.
Operator
Thank you. That was the last question. [Operator Closing Remarks]