The management of the premium motorcycle maker said the company is more concerned about growing its business than expanding the margins.
11 May 2024 | 4687 Views | By Kiran Murali and Ketan Thakkar
Amid growing competition from global players like Harley-Davidson and Triumph, Eicher Motors-owned Royal Enfield is looking to outpace the premium two-wheeler industry growth, with a target to grow at double the pace of the industry in the long term. The automaker said the company is more concerned about growing its ...
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Amid growing competition from global players like Harley-Davidson and Triumph, Eicher Motors-owned Royal Enfield is looking to outpace the premium two-wheeler industry growth, with a target to grow at double the pace of the industry in the long term. The automaker said the company is more concerned about growing its business than expanding its margins.
“We don't want to compromise on growth. We want to grow rapidly, we want to grow faster than the industry. That's our ambition. To grow faster, maybe even 2X of the industry level in the long term,” Eicher Motors Managing Director Siddhartha Lal told reporters in a post-earnings call.
Eicher Motors, which also sells commercial vehicles through its joint venture Volvo Eicher Commercial Vehicles, had a peak operating profit margin of over 30 percent five-six years back. The margin, however, dipped close to 20 percent during the pandemic years and has improved to around 26 percent.
“Getting to the previous high in EBITDA margin is not our ambition. We are delighted with where we are. We have taken a conscious call and we want growth. If we push, we could get to those margins if we want to. But it would probably compromise growth a bit, which we don’t want to,” Lal said.
Being a pure-premium player in the motorcycle market has helped Royal Enfield sustain its volume and profit growth in recent years as the premium market remained strong and resilient when the entry-level and mid-size markets were under pressure.
However, with several two-wheeler makers such as Hero MotorCorp and Bajaj Auto getting into the premium market space, Royal Enfield is facing competition and pressure on its market share.
The management said that now there is more spotlight on the premium segment with the competition and believes the competition will grow the size of the market. “The size of the 250cc + market was less than 1 percent in India 10 years back. Now the size of that market is some 10 percent and is still a small part of the overall market,” Lal said.
“So if that market goes to 20 percent, and we still have the kind of shares close to what we have today, around 85 percent plus, even after the competition, that is great. We want to grow the market and new entrants will help it grow,” he added.
Recently, Autocar Professional exclusively reported that Royal Enfield is planning for its biggest product onslaught in this financial year with six new model launches. The brand’s current portfolio includes ten models – Bullet 350, Classic 350, Hunter 350, Meteor 350, the 411cc-engine powered Scram 411 and Himalayan adventure bikes, the 650cc twins (Interceptor 650, Continental GT 650), the Super Meteor 650 and the Shotgun 650.
The management also confirmed Autocar Professional’s exclusive on the company’s capital expenditure for 2024-25. Eicher Motors will invest Rs 1,200 crore in Royal Enfield as capital expenditure for the current financial year.