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Bajaj’s CNG motorcycle is truly an engineering masterclass

Remains to be seen whether customers change their preference to CNG BJAUT has boldly ventured into uncharted territory with the launch of the world's first CNG-integrated motorcycle, Freedom 125. This innovative product not only marks a significant milestone in the global two-wheeler industry, but also promises notable benefits to consumers and the environment alike. We are impressed with the design and engineering on display in Freedom 125. We think the company has clearly done everything within its stride to make the motorcycle both attractive (despite having a CNG tank) and accessible to customers. However, it remains to be seen whether customers consider the vehicle for personal use. Hence, we refrain from forecasting any incremental sales numbers for BJAUT after this launch as it is too early to gauge the success of the product. Nevertheless, the stock has already witnessed a significant re-rating in the last 12 months on the back of its market share gains in 125cc+ domestic motorcycles, improved margins and a one-of-a-kind policy to reward shareholders. After a recent rally, the valuation at ~29x/25 FY25E/FY26E EPS appears reasonable. We reiterate our Neutral rating with a TP of INR8,660 (based on 22x Jun’26E consol. EPS).

Bajaj Freedom 125 - first CNG motorcycle with some best-in-class features

* Industry’s first CNG motorcycle: BJAUT has launched the industry's first CNG motorcycle featuring a 125cc engine, equipped with a 2kg CNG tank and a 2- litre petrol tank. The motorcycle boasts a total range of 330 km, delivering a power output of 9.5 PS and torque of 9.7 Nm.

* Design and features: Designed with contemporary styling, the motorcycle is highlighted by a modern LED headlamp. It incorporates advanced technological features for enhanced performance and user experience, including the longest seat in its segment for added comfort, and a first-in-class linked monoshock for improved ride stability. The robust design built with a trellis frame ensures added strength and durability.

* Available in three variants and five colors: Disc LED, Drum LED, and Drum versions are offered in seven dual-color options. Bookings for the motorcycle are now open in Maharashtra and Gujarat and pan-India bookings will start from early next quarter. The starting price is INR95k (ex-showroom) for the base Drum variant, INR105k for the Drum LED variant, and INR110k for the top Disc LED variant.

A feature-loaded bike

* Cost savings: BJAUT claims that this motorcycle will deliver significant cost savings, with 50% lower operating costs for daily rides, potentially saving up to INR75,000 over three years.

* Convenient features: It offers comfort and convenience features, such as the longest seat in its segment, a switch-on-the-go function, a common fuel cap cover for both CNG and petrol refueling, and a reverse LCD console with Bluetooth connectivity.

* Environmental benefits: The motorcycle reduces CO2 emissions by 26%, NMHC by 85%, and NOx by 43%

Key takeaways from the meeting

* The management has indicated that pricing for any new technology product that has to be established in the market needs to be aggressive. They consider this an investment for the future where there is a clear path to pre-determined profitability.

* Given the aggressive pricing and TCO benefits, BJAUT expects to entice customers to change their buying pattern to CNG vehicles for personal use.

* The motorcycle is certified for 102km per kg of CNG, offering a total certified range of 204 km on CNG. Real-world testing indicates a practical range of 115 km on CNG and 65km per liter on petrol.

* The motorcycle features a trellis frame that provides adequate protection for the cylinder and optimizes packaging.

* Initial production capacity for Freedom 125 stands at 10k units in the first three months, scaling up to 30-40k units by FY25 end.

* Initial focus will be on catering to domestic markets. Thereafter, BJAUT would look at few export markets like Egypt, Tanzania, Colombia, Peru, Indonesia, and Bangladesh.

* The CNG network in India covers 335 towns, constituting 70% of the twowheeler markets, with rapid expansion ongoing. The addressable market includes all 100cc and 125cc motorcycles, totaling 650k units per month, with BJAUT currently holding a share of 150k units per month.

* Technological innovations include patents filed for a starter motor-free design with automatic fuel switching between CNG and petrol.

View on the product

* We are impressed with the design and engineering on display in Freedom 125. It is such a design and engineering master-class that no one would be able to point out from the outside that this is a CNG-based motorcycle, if not highlighted earlier.

* The company’s profound knowledge and expertise in CNG technology for over two decades has helped it launch this product customized for two-wheeler customers.

* The fact that BJAUT is the first company globally to launch a CNG-based motorcycle is in itself a moment of pride for the company. This also underscores their commitment to innovation and sustainability.

* Apart from obvious TCO benefits, BJAUT is positioned attractively to entice customers.

* We think the company has clearly done everything within its stride to make the motorcycle both attractive (despite having a CNG tank) and accessible to customers. The real test is now to see whether motorcycle customers adopt this new technology.

* It is pertinent to note here that the adoption of CNG technology for personal use in passenger vehicles has so far been limited. We need to see whether 2W customers are willing to make this shift now that a good product is in the market. We would closely monitor this in the coming months.

Valuation and View

While the product has attractive look and feel, it remains to be seen whether customers adopt this vehicle for personal use. We refrain from forecasting any incremental sales numbers for BJAUT after this launch as it is too early to gauge the success of the product. However, the stock has already witnessed the significant rerating in the last 12 months on the back of its market share gains in 125cc+ domestic motorcycles, improved margins and a one-of-a-kind policy to reward shareholders. After a recent rally, the valuation now at ~29x/25 FY25E/26E EPS appears reasonable. We reiterate our Neutral rating with a TP of INR8,660 (premised on 22x June-26E consol EPS).

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