Bajaj Auto is actively evaluating Tamil Nadu and Telangana for a new electric vehicle manufacturing facility, driven primarily by unpaid EV subsidies exceeding ₹70 crore owed by the Maharashtra government. This substantial outstanding amount has become a critical factor in the company's expansion strategy, prompting management to look beyond its traditional Maharashtra base. The dispute escalated when Managing Director Rajiv Bajaj publicly criticized Maharashtra's EV policy as a "massive failure," noting that in his 36-year career, he had never witnessed such a major policy breakdown.
The financial impact is significant. Bajaj Auto has invested approximately ₹750 crore in its EV ecosystem at the Akurdi facility in Pune, with supporting vendors investing another ₹250 crore in the local component ecosystem. The unpaid subsidies represent nearly 7% of this combined investment, creating cash flow concerns and raising questions about the state's commitment to supporting EV manufacturers. The company has earmarked an additional ₹420 crore for EV-related capital expenditure, making any expansion outside the state a decision with substantial ecosystem implications.
Tamil Nadu and Telangana are offering competitive fiscal packages to attract Bajaj Auto. Tamil Nadu's EV Policy 2023 provides either 100% SGST reimbursement, a 2% turnover subsidy, or up to 15% capital subsidy. The state also offers 100% electricity tax exemption for five years, 100% stamp duty exemption, and land at concessional rates—10% in A&B districts and 50% in C districts. For MSME EV component manufacturers, Tamil Nadu provides an additional 20% capital subsidy and 6% interest subvention.
Telangana's updated policy offers 20% capital investment subsidy capped at ₹30 crore for mega enterprises, 100% SGST reimbursement capped at ₹5 crore annually (₹25 crore cumulative over seven years), and 25% power tariff discount for five years. The state also provides land in EV parks at concessional rates on long-term lease.
However, Maharashtra's existing supplier ecosystem remains formidable. The Chakan MIDC belt hosts 750+ industries including Mercedes-Benz, Volkswagen, Tata Motors, and Mahindra. The Pune-Pimpri-Chinchwad region contains more than 4,000 manufacturing and ancillary units. This mature network provides established relationships, proven quality standards, and integrated logistics that new locations would require years to replicate. The cost of relocating or duplicating supply chains could offset the benefits of state incentives.
The risk of policy discontinuity under changing state political regimes is a significant driver of Bajaj Auto's preference for geographic diversification. Industry experts emphasize that "spreading out risks in business makes sense simply because there is no telling what a change in political regime at the State level might lead to in terms of stability and direction".
The situation highlights coordination gaps within the Maharashtra government. While the industries department focuses on attracting manufacturing investment, the transport department oversees subsidies and permit decisions. Maharashtra recently restricted the issuance of new auto-rickshaw permits citing market saturation, directly impacting Bajaj Auto, which holds approximately 87% market share in the state's three-wheeler segment.
Royal Enfield's multi-state approach provides a relevant case study. The company operates four facilities in Tamil Nadu with 20 lakh units annual capacity, while investing ₹2,500 crore in a greenfield facility in Andhra Pradesh. This expansion is "aimed at expanding future capacity rather than shifting operations from Tamil Nadu". The strategic location close to the Tamil Nadu border allows Royal Enfield to stay connected to Chennai's supplier ecosystem while diversifying political risk.
Maharashtra's Chakan industrial belt is staffed largely by inter-state migrant workers from Bihar, Uttar Pradesh, Jharkhand, and West Bengal. This mature, experienced workforce has decades of automotive manufacturing expertise. However, the industry faces a growing talent crunch as the EV transition accelerates—the shortage is not of people but of job-ready talent with expertise in electronics, battery systems, and automation.
Tamil Nadu's Sriperumbudur-Oragadam belt is the biggest automobile hub in South Asia, hosting 20+ Fortune 500 companies and providing approximately 300,000 direct jobs. The state has established the Tamil Nadu Apex Skill Development Centre for Automobile (TN AutoSkills), jointly promoted by TNSDC and ASDC, to build a future-ready workforce. However, Bajaj Auto would face intense competition for talent from established players like TVS Motor, Ola Electric, and Ather Energy.
Logistics infrastructure presents another key differentiator. Tamil Nadu boasts three major ports (Chennai, Kamarajar/Ennore, VOC/Tuticorin) and over 17 non-major ports. Chennai Port handled 51.53 million tonnes of cargo in FY 2023-24, including 1.59 million TEUs of containers. The state produces nearly one-third of India's vehicles and over 60% of the country's automotive exports. This port access facilitates import of critical components like rare earth magnets from China, essential for high-performance EV motors. Transcripts +1
Telangana, being land-locked, depends on neighboring states' ports. Hyderabad connects to seaports through road and rail networks to Chennai Port, Krishnapatnam Port, and Visakhapatnam Port. The state is developing logistics parks and planning a Dry Port Facility in Nalgonda District with multi-modal connectivity. This adds transit time and logistics costs for imported components compared to Tamil Nadu's direct port access.
Bajaj Auto's product mix decision significantly impacts manufacturing requirements. The Chetak electric two-wheeler is produced at Chakan 2 (Pune) in a state-of-the-art dust-free, temperature-controlled facility using cutting-edge robotic technology. Current production capacity is 50,000 units per month as of Q4 FY26. Technical specifications include a 3 KWH IP67-rated Lithium Ion battery, 4.08 KW peak power output, and above 95 kilometers range in Eco mode. AnnualReports +3
Electric three-wheelers (GoGo, Riki) are produced at the Waluj plant with total commercial vehicle capacity of 1,020,000 units per annum. These vehicles feature larger 12 Kw battery packs for Maxima Z and RE variants. The manufacturing requirements differ substantially—e-2Ws demand higher precision for battery integration and electronic components, while e-3Ws require more robust chassis construction for commercial use. AnnualReports +1
A new plant would need flexible manufacturing capabilities to accommodate both product categories. Bajaj Auto has emphasized a calibrated, step-by-step expansion approach rather than "big bang" expansion. The company's flexible manufacturing capacity allows rapid conversion from other product lines to Chetak production, suggesting a preference for adaptable facilities that can respond to changing market demands. Transcripts +1
Tamil Nadu's established automotive hub presents both advantages and challenges. The state holds 70% share of India's electric two-wheeler production, primarily driven by the Hosur cluster. However, TVS Motor leads the market with 29% share, followed by Bajaj Auto at 22.7% and Ather Energy at 18.5%. Ola Electric has slipped to seventh position with 3.7% market share due to servicing issues and spare parts unavailability. This intense competition could lead to talent poaching and supplier capacity constraints.
Telangana's technology-focused industrial policy offers different advantages. The state is positioning itself at the forefront of Industry 5.0 transition, focusing on human-centric, sustainable, and resilient industrial practices. Telangana has established T-Hub, We Hub, and RICH to accelerate reskilling workforce for innovation. The Yantram Fund of ₹100 crore over four years supports technology transformation in MSMEs. This technology-ready environment could benefit Bajaj Auto's EV innovation efforts.
The expansion strategies of other automakers into Maharashtra are influencing the state's urgency. Toyota plans to triple Indian production capacity to one million units by 2030 with three new Maharashtra plants, investing an estimated JPY¥300 billion (US$1.9 billion). Hyundai announced ₹7,000 crore investment in Maharashtra at Talegaon factory. Mahindra & Mahindra announced ₹15,000 crore investment for an auto and tractor manufacturing plant in Nagpur. These commitments increase Maharashtra's stake in retaining established manufacturers like Bajaj Auto.
The financial implications of expansion decisions are substantial. Greenfield projects cost 40-60% more upfront than brownfield projects. Typical CAPEX ranges from $12-55 million for greenfield versus $6-22 million for brownfield. Greenfield development takes 12-24 months from land identification to first production, while brownfield expansion can achieve first incremental output in 6-12 months.
Bajaj Auto maintains a strong financial position with surplus cash of nearly INR 17,000 crores after significant investments. The company invested INR 2,100 crores in its capital financing arm BACL in FY25, with capital expenditure of INR 700 crores directed toward capacity expansion—60% allocated to the electric business. This financial strength provides flexibility for both greenfield and brownfield options. Transcripts +3
Establishing manufacturing in a new state significantly enhances Bajaj Auto's bargaining power with Maharashtra. Rival states like Karnataka and Tamil Nadu have initiated discussions with the automaker. The company has asked Maharashtra to pay 60% of the subsidy claimed (₹60-70 crore) and is scouting for another state to invest in expansion. Industry executives warn that when a large OEM pauses or redirects investment decisions, "the impact is felt across vendors and employment linked to the supply chain".
The optimal strategy may be a hybrid approach—brownfield expansion in Maharashtra to address immediate capacity needs while pursuing greenfield investment in southern India for long-term diversification. This balances capital efficiency with strategic risk mitigation, following Royal Enfield's successful multi-state model while maintaining flexibility in negotiations with Maharashtra.
