Royal Enfield pins hopes on new bikes to push sales

New 650cc bikes and a renewed thrust on ramping up its sales and distribution network in India will spearhead the turnaround plan of Eicher Motors Ltd, the maker of the iconic Royal Enfield motorcycles, according to the plan unveiled by the company in an investor meet in the UK earlier this month.

This comes in the wake of overall sales of Royal Enfield models declining by 13% in the fourth quarter from a year ago.

India will remain the company’s primary market, said Siddhartha Lal, managing director, Royal Enfield. “India is still our highest priority and every new product that is being developed is being made with India in mind,” Lal told investors.

Lal said the new 650cc twins, Continental GT and Interceptor, have been developed and are being priced to upgrade riders in the domestic market. “The growing trend of premium bikes will continue for decades in India. At Royal Enfield, we are riding on that,” said Lal, credited with the revival of the 100-year-old brand over the last decade with a slew of new launches that combine the vintage appeal of the motorcycles with contemporary features.

The revamped Royal Enfield models led by the Classic 350 continued to post robust growth numbers for many years, but reported a drop of 14% in December 2018 in domestic sales, the sharpest decline since June 2011 when it had posted a 31% drop in its domestic volumes. Sales for Royal Enfield stood at 56,026 units in December against the 65,367 units clocked in the year-ago period.

The decline in sales of Royal Enfield motorcycles is in sharp contrast to an unprecedented surge in the bookings for new bikes from the Mahindra & Mahindra (M&M)-controlled Classic Legends’ Jawa Motorcycles, which were unveiled in mid-November last year. Like Royal Enfield, Jawa was also founded in early 19th century in what is now the Czech Republic.

Eicher will open 350 studio outlets that will have 225 sq. ft of retail space and 275 sq. ft of area dedicated to the workshop, according to Lalit Malik, chief financial officer, Eicher Motors. “These will be one-sixth the size of a typical Royal Enfield showroom in a metro. We don’t expect these small stores to sell more than 12-20 bikes per month. This is our first rural foray in India. Under our big distribution thrust, we aim to touch 1,100 towns via 1,350 stores this year,” said Malik, who also said that 80 conventional large-format stores will be added in 2019. The company now has a network of 825 outlets in India and 42 stores globally.

“We attended Eicher Motors’ investor meet in the UK. Notwithstanding the current sluggishness in Royal Enfield (RE) volume, the company is well placed to leverage all its efforts over the last decade for an even stronger next decade. A big driver for this is plugging of geographical gaps (rural/exports), leveraging the resounding success of the recent 650cc Twins for its future product offerings, and growing non-motorcycle revenue. The seed of all this remains the cult RE brand, the legacy of which no competitor can replicate,” said Axis Capital in a report.