The mid-size motorcycle maker's retail volumes grew almost 26% during the festival season.
13 Nov 2024 | 2311 Views | By Kiran Murali
After four consecutive months of decline in monthly wholesale volumes, Royal Enfield recorded growth in September and October, with festive demand propelling October monthly dispatches to the 1-lakh unit milestone. While strong festive demand usually tapers off post-festival season, the automaker is witnessing a positive trend in the demand ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
After four consecutive months of decline in monthly wholesale volumes, Royal Enfield recorded growth in September and October, with festive demand propelling October monthly dispatches to the 1-lakh unit milestone. While strong festive demand usually tapers off post-festival season, the automaker is witnessing a positive trend in the demand and expects a positive trajectory.
"Certainly, there will be a change in demand during the festive to the post-festive period. But if compare the pre-festive to post-festive demand, it has gone up…In the last 10 days of November, traction, inquiries, and walk-ins have been very good. That is a very positive sign, which we are seeing," B Govindarajan, Royal Enfield Chief Executive Officer told investors in a post-earnings call.
The mid-size motorcycle maker had seen its monthly wholesale volumes fall between May and August. In the second quarter of the current financial year, Royal Enfield sales declined 1.8% on year to 2.25 lakh units. The company's operating profit, or EBITDA, remained almost flat at Rs 1,087.7 crore, while its operating profit margin contracted to 25.5% from 26.4%.
However, the company ramped up dispatches in September and October in anticipation of strong demand during the peak festive season. The coincidence of both Navratri and Diwali falling in October 2024 created a perfect storm for sales during the month.
Royal Enfield’s retail volumes grew almost 26% during the festival season, much higher than the market growth. Thanks to the company's new launches, focus on Bullet and Classic models, and marketing initiatives. "The marketing and product interventions have really worked and the demand is sustaining," Govindarajan said.
"During this time, the middle-weight segment saw a lot of activities, actions, and noise. Last time I mentioned that any amount of marketing effort we would have done would have been an over-emphasis at that point, and would have gone into a saturated phase. So, we held back on market activations and all those things. We wanted to enter market activations around September onwards."
The company recently launched the Guerrilla 450 and the 2024 Classic 350 in a new avatar. The automaker also introduced fresh colors and additional features to its lineup, while introducing the new bullet into markets where it was losing the market share. The company also increased the floor funding and ramped up marketing initiatives through video and print advertisements, which the management said helped rekindle the interest in the brand.
"The desire is back. There is an interest that we are seeing once again with a lot of positivism. That is why the brand is actually vibrant once again," he said.
Meanwhile, Royal Enfield generates around one-third of its domestic volume from the rural area. In October, rural India continued to demonstrate its market strength, posting robust growth in key vehicle categories, despite the festive season traditionally driving stronger urban sales.
The recent data from the Federation of Automobile Dealers Associations (FADA) also revealed interesting shifts in the urban-rural dynamics of India's auto retail market. In October, auto sales in urban areas were down 2.7% on-month and 1.5% year-on-year. In contrast, rural sales were up 2.5% on the month and 1.4% on the year in October 2024.
"Rural demands are going up. In urban areas, the overall growth rate is lower. We are seeing it even for our motorcycles. There are some products like Guerrilla 450, which are urban-centric. Now we are going to pick up those areas where it has a higher traction and we are going to work on it during the two quarters. That is where our focus is going to be on the market activations," Govindarajan added.