Bajaj Auto has launched a new manufacturing facility in Manaus, Brazil, to produce KTM and Husqvarna motorcycles. This move aims to improve cost efficiency and bypass import taxes as the company works to turn around the loss-making KTM brand. Investors will watch whether this shift to local production can help stabilize margins amid ongoing restructuring and job cuts at the Austrian subsidiary.
Bajaj Auto has officially moved to direct manufacturing in Brazil, establishing a new motorcycle production plant in the Manaus free-trade zone. This decision represents a strategic shift for the Pune-based automaker as it seeks to gain tighter control over the operations of its Austrian subsidiary, KTM. By moving away from its previous assembly partnership with Dafra Motos, the company intends to standardize quality and streamline its supply chain in the South American market.
This expansion comes at a difficult period for the broader entity, Bajaj Mobility AG. While the company reported a significant 65 percent increase in first-half revenue to 701.4 million Euro, financial pressure remains evident. The business is currently dealing with an operating loss of 24.8 million Euro and negative free cash flow of 22.1 million Euro. To address these financial hurdles, the company is undergoing a restructuring process that includes a reduction of 500 roles, aimed primarily at trimming fixed costs among office and management staff.
The new facility in Brazil is designed to produce both KTM and Husqvarna motorcycles. With an initial investment of 20 million Brazilian Real, the plant is set up to produce 3,500 bikes by the end of 2026, with plans to scale production to 8,000 units throughout 2027. By sourcing 80 components from 15 local suppliers, the company expects to reduce the tax impact that comes with importing fully built motorcycles, potentially making the bikes more price-competitive for local buyers.
For investors, this move highlights the company's focus on balancing cost management with brand prestige. While the Chakan plant in India continues to serve as a key manufacturing hub for global distribution, the Brazilian site is a test of localized engineering. The company is trying to ensure that these efficiency measures do not harm the performance-oriented reputation of the KTM brand. A key point to monitor will be whether this localized manufacturing strategy can successfully lower costs enough to improve the subsidiary's bottom line. The long-term success of this restructuring plan, including the potential addition of a second production shift in 2028, will be essential for shareholders tracking the financial recovery of the global mobility business.