Royal Enfield, the country’s largest maker of mid-sized motorcycles, said it has cut down on the waiting period on most of its motorcycle models, and promised to keep the excitement going as it deals with new competitors like Jawa.
The comments by Siddhartha Lal, CEO of Eicher Motors comes in the context of the impending relaunch of its former rival Jawa, which is expected to launch within the next one month under the ownership of Mahindra & Mahindra. Interestingly, Mahindra & Mahindra is also a commercial vehicle maker like Eicher Motors, the owner of Royal Enfield.
Lal said Royal Enfield’s aim is to have at least some of its bikes available off-the-shelf or nearly off-the-shelf, even as some of the models may be available only after a waiting period.
“For example, on certain variants right now — let’s say Thunderbird X, Stealth Black, Signals — they’ve had waiting periods, even though the Classic 350 is available nearly off-the-shelf in most places,” he said.
Classic 350 is the company’s largest selling model, while Stealth Black and Signals are stylistic variants of the model.
Siddhartha Lal, who took charge of a loss-making Royal Enfield in 2000 at a young age of 26, is credited with scripting one of the biggest turnarounds in India’s automobile history, transforming a somewhat old-fashioned auto brand into a must-have obsession for the Hell’s Angels of today.
For most of its recent life, Royal Enfield has never faced a problem of demand. In fact, the company, which makes many of its components by hand, has been struggling to keep pace with demand as income levels rise.
Over time, it has managed to increase its manufacturing capacity to about 75,000 per month today from about 75,000 per year in 2011.
Just two years ago, almost none of its models were available off-the-shelf. Customers had to wait for at least 2-3 months even for the most basic models. For some of the trendier ones like Thurnderbird, the waiting periods were closer to six months.
While this added to the pride of owning a Royal Enfield motorbike, it also put off at least some of the would be buyers.
Lal said the company is not interested in trying to use scarcity as a marketing tool.
“It was never the main intent to curtail [the sales of] the product. That was never our methodology. The right approach is to have some products that are available off-the-shelf or nearly off-the-shelf…That’s a balance which is good..We have enough production capacity now to be able to deliver for the basic requirements,” he said.
COMPETING WITH JAWA
Lal maintained a confident face in the face of upcoming competition from Jawa. Mahindra & Mahindra announced earlier this month that it has already sold all its production up to September, even before the first bike has hit the dealers.
“Of course, we take deep cognizance of all competitors coming in,” Lal said on Jawa’s launch.
“Initially, there’s always a hype. When people are entering, they make some noise, it’s a new product, there’s some excitement to people…New entrants: Of course, there will be many… There will be copy-cat types, there will be people trying to do totally different things. That’s the competitive nature [of the market]. I don’t think that’s going to abate.”
Jawa will be selling two models — the Classic, priced at Rs 1.55 lakh and the ’40’, priced at Rs 1.66 lakh. Both prices are right in sweet spot of Royal Enfield’s sales. For example, RE Classic, the company’s biggest selling model, is priced at Rs 1.4 lakh.
“We have very strong plans, both on the commercial side as well as product side,” Lal said, refusing to elaborate. “We have lots of new products in the pipeline.”
The CEO said RE is no longer the company that it used to be, and can today produce bikes that rival international brands in their quality, giving the example of the recently launched Interceptor and Continental 650cc bikes.
“Our twins are a case in point. They’re absolutely amazing products at global levels of fit, finish and response, much better than anything else that has come out in the market,” he said.
“We are on a great wicket. It is the others who have to try hard to even take a nibble out of us.”
Lal also said the company is currently working on launching new models that are compliant with the new, BSVI emission norms.
Models that use carburetor for injecting fuel into the engine will have to be phased out as part of the move to the new emission standard.
The new emission norms, said Lal, will require electronic fuel injection as well as the use of more fuel catalysts.
But the tweaks will not change the basic nature of the RE motorcycle, he promised.
“That in itself does not set any engine characteristics,” he said. “At Royal Enfield, we are extremely close and cognizant of what makes our motorcycles successful and where we can have improvements.”
Instead of looking at the transition as a challenge or disruption, RE is looking at it as an opportunity to improve the refinement of the engines to global levels.
“We are not just using BS-VI as an opportunity to meet emission norms. But it’s an opportunity for us to take our refinement levels to very very high levels. That’s our approach.
“We understand what people love about our motorcycles. We plan to retain the things they love and we plan to improve the things that need improvement.”
However, the company will have to wrestle with the question of higher costs after the transition to the new fuel standard. It is expected that the cost of manufacturing a BS-VI bike would be Rs 8,000-15,000 more than that of a BS-IV motorcycle.
However, another round of price increases may not be easily absorbed by fans of RE’s motorcycles. The company is barely done with hiking the price of its bikes by Rs 21,000-25,000 as it moves all its models to anti-skid braking system or ABS. Lal said practically all the sales are happening on ABS models.
Asked if the company plans to pass on the increased cost of BS-VI models at one go, Lal pointed out that BS-VI is still a year away. “We’ll take a call on how it is managed [closer to the event],” he said.
The company will also to find innovative ways to increase its monthly sales — which have largely plateaued in recent months due to a variety of reasons — as more and more capacity comes online.
By around January of 2020, extra production capacity of nearly 30,000 bikes per month will come online. Together with existing production of 75,000 per month, the company’s total capacity will hit 1.05 lakh bikes per month.
This will pose a challenge to the automaker as it sold only 70,872 bikes in India in January and only 56,026 in December. For the first 10 months of the current fiscal year, the company has dispatched around 7.03 lakh motorcycles, up only 5% compared to last year.
Lal said he does not expect there to be a ‘large gap’ between production and sales.
“The job of the company is not just to make the bikes, but also to sell the bikes that are made. The whole demand generation effort is at play, and you’ll see us do quite a few things in the next 2-3 years as we have capacity coming,” he said.