New Delhi: Amid demand slowdown and dealership shutdowns, India’s largest mid-capacity motorcycle manufacturer, Royal Enfield, said that it has fast-forwarded its retail expansion plan of adding 350 studio outlets to its existing retail network by the end of Q2FY20. The original plan, first announced in June this year, was to open up as many studio outlets by the end of FY20.
The planned studio outlets, small retail-cum-workshop spaces, are a key element of the bikemaker’s turnaround plan in the domestic market. These are aimed at deepening the company’s retail presence in rural areas by opening small outlets, thereby bringing down the real estate and manpower costs per store. Each planned studio store will be set up within an area of 500 square feet, with 225 square feet allotted to retail and the remaining space to workshops.
“We have accelerated the plan to set up 350 studio stores and we might set up 450-500 such stores by the end of Q2FY20 to ensure increased walk-ins as we head into the festive season," said Vinod Dasari, CEO, Royal Enfield.
Almost half of the planned studio stores have already come up this month, with existing dealers, who are opening up new branches in smaller towns, driving Royal Enfield’s footprint expansion, he added.
According to Dasari, these small outlets will be able to breakeven the expenses even if they are able to sell 10 bikes per month. This, notably, is a calculated move by the company to tap into growth in tier 2 towns and smaller belts, which, it said, accounts for almost 60% of total motorcycle sales.
Meanwhile, sales of Royal Enfield motorcycles, which declined 13% year-on-year in Q4FY19, has now registered an even steeper decline of 21% year-on-year in Q1FY20. Its total domestic dispatches in Q1FY20 stood at 1,74,430 units, according to data released by the Society of Indian Automobile Manufacturers (SIAM). As a result, the company has posted a dip of 22% year-on-year in its consolidated net profit to ₹452 crore in the the last quarter.
Given the downturn, Royal Enfield may also revise its outlook on building its production capacity up to 9,50,000 units per annum by the end of FY20. Lalit Malik, CFO, Eicher Motors, said the current motorcycle inventory levels were below one month, and the company would transition to BSVI in Q4FY20.