Royal Enfield-maker Eicher Motors in overseas sales pushIn the News
Mumbai: Eicher Motors Ltd plans to export vehicles to Southeast Asia and Latin America as it builds on record sales at home.
The Indian maker of Royal Enfield, the World War II-era British motorcycle owned by stars including Brad Pitt, is predicting more demand in emerging markets for mid-sized bikes with an engine capacity of 250cc to 650cc as people become more affluent, managing director Siddhartha Lal said in an interview. Eicher, which acquired control of Enfield India in 1993 and revived the almost-bankrupt unit, is seeking to increase the share of revenue from two-wheelers from 16% of the $1.2 billion it reported in the year to 31 December 2012, he said.
“Mid-sized bikes are ideal for these markets as they are reasonably fuel-efficient, maneuverable and not too much more expensive,” Lal said in his office located in Eicher headquarters in Gurgaon near New Delhi. “There are markets that aren’t conducive to big bikes and the mid-sized market is underserved.”
The company is planning to expand the motorcycle business after reporting the best quarter at its Enfield unit, where sales rose 45% in the three months ended March. Eicher, which earns the remaining 84% of its revenue from trucks it makes in partnership with Volvo AB, said a key gauge of its profitability beat all local rivals in 2012 amid the slowest pace of economic growth in a decade.
The former Tonight Show host Jay Leno and musician Billy Joel are also among the owners of Royal Enfield, according to their official websites. The British military used the bikes, including the ‘Flying Flea’ designed for parachute drops with airborne troops during the Second World War.
Royal Enfield, which makes the Rs.1.5 lakh 500cc Classic and the 350cc Thunderbird, saw sales jump 52% year fueled by demand from a rising middle class in India’s biggest cities.
Exports, catering to custom orders from buyers seeking to own a piece of history in countries such as the US, UK and Australia, accounted for 2.9% of the motorcycle maker’s 124,270 unit sales in the year ended 31 March, according to data from the Society of Indian Automobile Manufacturers.
“There’s a gap in this segment as vehicles like BMW and Harley Davidson are all above 600cc,” said Mukesh Saraf, an analyst at Spark Capital Advisors in Chennai. “If other Indian manufacturers like Bajaj are able to export, then Royal Enfield can do as well. There’s no way to gauge the potential of the mid-size segment both abroad and in India.”
‘Like a gun’
Bajaj Auto Ltd, India’s second-biggest maker of motorcycles exported 1.29 million motorcycles, or more than 33% of the 4.78 million it produced in the year ended March. The Pune-based company sells motorcycles ranging from the 100cc Discover to the 220cc Pulsar.
With its heritage as a weapons maker and ‘Made like a gun’ as tag line, Royal Enfield started in the 1890s making bicycles, lawn mowers and motorcycles in England. Since the 1940s, the company hasn’t much altered the technology in the single- cylinder engined two-wheelers except for modern features such as direct fuel injection and switch ignition.
The bike maker will introduce a new model, a 535cc ‘cafe racer’ called the Continental GT this year, while planning two more platforms for future variants, Lal said, without elaborating.
The company last month opened its first new motorcycle factory in almost six decades, that can build 150,000 units annually. That capacity will be expanded to 250,000 in 2014, as Eicher looks to pare waiting lists that average 8 months, Lal said. Lal expects deliveries to jump 39% to 175,000 units in 2013.
The Enfield motorcycles are more for enthusiasts than for people who need vehicles to do their daily chores, which means Harley-Davidson Inc.’s lower-end bikes could pose a challenge for the Indian maker in these markets, said Mahantesh Sabarad, an analyst at Fortune Financial Services India Ltd in Mumbai.
“There’s a potential in these markets, but it will take a long time for them to build their brand,” he said.
Royal Enfield, whose Classic fitted with a sidecar featured in the movie Harry Potter and the Deathly Hallows: Part 1, says its master plan involves eventually building 500,000 motorcycles annually.
The company has its products planned for the next 10 years, Lal said without elaborating, as Eicher targets more customers beyond Delhi, Mumbai and Bangalore.
“Now, we’re firing on all cylinders,” says Lal. “To me, what’s relevant is that in the top 10-15-20 mid-size motorcycle markets in the world, we must be No. 1 or No. 2.”
First Published: Mon, May 20 2013. 08 44 AM IST in the “Live Mint & The Wall Street Journal 5/20/2013 http://www.livemint.com/Companies/Dt2jA34Gsdum7hR5OP6HzN/Royal-Enfieldmaker-Eicher-Motors-in-overseas-sales-push.html