Royal Enfield: Eicher's Money Spinner

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Highlights

  • This year Royal Enfield has invested Rs. 600 crore on India operations
  • The sales target has been set at 6.2 lakh units by the end of 2016
  • A third plant will be opened in the third quarter of FY 2017-18

Siddhartha Lal, the maverick MD and CEO of Eicher Motors has been at the helm of affairs for Royal Enfield since 2000, at a young age of 26. The cult motorcycle manufacturer was like embers in a dying fire. But then the Lal was firebrand too As he became the COO for Eicher Motors in 2004, he sold off 13 out of 15 businesses that were under Eicher and decided to focus only on CVs and Royal Enfield of course. And needless to say, the last few times Royal Enfield has launched a product; it has been the best Royal Enfield ever had to offer. Be it the Thunderbird 500 in 2012, the Continental GT in 2014 or the Himalayan, each motorcycle, at the time of its launch was the Royal Enfield's best ever effort. That says a lot about the company and its focus on manufacturing quality motorcycles. Nearly 60 per cent of its sales come from the top 20 cities in India. Therefore, it comes as no surprise that Royal Enfield contributed to nearly 90 per cent of Eicher's overall profit for Q1 2017

Royal Enfield

Royal Enfield Bikes

Royal Enfield Factory Chennai(Royal Enfield to open a third factory in Chennai by 2018)

In 2005, Royal Enfield sold approximately 25,000 units. That figure went up to 50,000 by 2010. Come year 2014 and the figure shot up to 2, 96,370 units. More recently, the figures for Q1 2015 were 92,845 units sold and by the time the year ended, Royal Enfield had sold almost 4, 44,527 units, which is a growth of nearly 50 per cent over the total sales in 2014. Even the exports grew by a solid 33 per cent to 8,258 units, taking the total sales for the year of 2015 to 4, 52,812 units.

There is a 4-month waiting period on the Himayalan and the Classic 350, the two biggest sellers for Royal Enfield. There were 2,73,856 units of the Classic 250 sold in FY 25-16, which also made it feature on the top 10 selling motorcycles list as well. It contributed to a whopping 55 per cent of the total sales of Royal Enfield in the same period.

Royal Enfield Himalayan(Royal Enfield Himalayan)

Royal Enfield's first new plant was inaugurated in 2013 at Oragadam, Chennai with an initial investment of ₹ 150 crore and had an initial production run of 150,000 motorcycles a year with a yearly capacity of 300,000 motorcycles. Also, with regards to catering to the demand that has grown manyfold, the company increased the production capacity at its Chennai plant to about 48,000 units a month from an earlier 45,000 units. The total installed capacity from both the plants stand at 6, 75,000 units a year.

Royal Enfield 750cc parallel Twin(Royal Enfield 750cc Parallel Twin)

This year Royal Enfield has invested ₹ 600 crore, primarily on the second assembly line at Oragadam and on the third plant that will be situated in Vallam Vadagal, near Oragadam in Chennai. The third plant will be catering to all the global RE motorcycle platforms, even the bikes with a capacity of above 500cc. RE says that its third plant will be operational by third quarter of FY 2017-18.

The company had also started work on the second phase of the plant which was approved that will be looking to increase the manufacturing capacity to almost 900,000 units a year by 2018. A target of 6, 20,000 units has been fixed for the calendar year of 2016.

Royal Enfield's focus is very clear. It is to become one of the biggest players in the mid-size motorcycle segment across the world. And by the looks of it, Royal Enfield already has a solid plan in place.

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