Unperturbed by rising competition in the mid-size motorcycle segment, Siddhartha Lal, MD of Eicher Motors says Royal Enfield is several steps ahead of competition.
With a 90-95% market share in the 250cc-plus motorcycle segment, Eicher Motors-owned Royal Enfield is readying itself with a mid-term plan called RE 2.0, which is focused on expanding product portfolio, geographical reach and non-motorcycle revenue.
Unperturbed by rising competition in the mid-size motorcycle segment, Siddhartha Lal, MD of Eicher Motors says that Royal Enfield is many steps ahead of the competition.
“It’s very telling that they all have to tie up (and) neither are able to do it alone,” Lal said about domestic competitors tying up with global companies to enter the premium motorcycle segment. Despite its vast cash reserves, the company was not eagerly looking at acquisitions, including the likes of the Italian brand Ducati which is purported to be put on the block by the VW Group.
“I don’t think we will do an acquisition where we think we can only incrementally improve it,” Lal told ET’s Nehal Chaliawala, Ketan Thakkar and Sharmistha Mukherjee in an interview.
Edited excerpts:
Why is Royal Enfield taking longer than rivals to get back to growth? Is the premium motorcycle segment declining?
It’s not because the mid-size segment is not back. It is, of course, down 10% from last year October, but it’s up month-on-month. It has taken us time to get production up, honestly. Everyone is shouting and screaming for more bikes – the dealers, the international guys.
We have bare minimum inventory everywhere. So, basically, retail has been very strong, our inventories are depleted entirely, production is catching up and now it’s there. So, it’s not a demand issue. If anything, it’s a supply and timing issue for us. But even the supply is back in order.
Do you expect demand momentum for automakers to sustain after the festive season?
In the long term, we always have a bullish view on the mid-size segment just because there are people wanting to upgrade and there’s a premiumisation trend. I can speak a lot about the long term. I have nothing to add on the short term.
Even under normal circumstances, I find it difficult to say what will happen. In a situation like this, where it is all very turbulent, no one knows what’s going to happen. We are very quick to respond to things. As of right now, the demand situation is looking good and it is looking sustainable.
What do you think about emerging competition in the segment?
All our friends in the industry are trying to find ways to make a dent in this market, and it’s very telling that they all have to tie up. I’m saying this for the Indians and for the international partners, that neither are able to do it alone. That’s not a guaranteed success methodology for people to enter the market. They’ve done that in the past and they’ve failed. I’m not saying they will all fail.
I’m sure they’ll have amazing products and they’ll do really well. It’s just that we are many steps ahead. We have all the technology, we built that capability. Our commercial abilities in terms of sales, marketing, distribution, and service are very strong.
A lot of them have very different things that they’re up to. We do a few things and we do them really well. So, while they come out with their first product one year, two years, or five years from now, we’ll be up to third-fourth-fifth generation of those products and hopefully way ahead.
What are the key pillars of RE 2.0 and how do you see the company 10 years down the line?
We thought a lot about it and that’s when we got Vinod Dasari to join us (as Royal Enfield chief executive) and take Royal Enfield to the next level. The driving force behind all that is to become a global premium motorcycle brand and to my knowledge, the only global premium consumer brand out of India.
Since it’s a motorcycle company, there will have to be great products. But I would say the bike is only a small part of our future. It’s about the entire ecosystem. We believe in experience and experiential concepts. People should not discover Royal Enfield because we put an ad listing the price of our motorcycles. I would die if that’s the first way people discover us. They should discover us because we’ve got rides and events, they’ve seen a friend or a colleague ride a Royal Enfield, or someone’s talked about it beautifully.
Once you become an owner, you should feel special. We’re not a typical automotive company which just wants to move metal and hopefully get a little bit of money from you every time you service your vehicle. We want to engage, we want a community, not just because it creates stickiness but also because we believe that’s what motorcycling is about. And that all now is going to be powered by digital.
We want to be able to reach each customer differently and everything has to be premium. It’s very curated, it’s very thought through, it’s very nicely done. So, once you get that premium experience, you don’t want to go back into a shabby experience.
If VW reconsiders selling the Ducati brand, will you look at it?
We always consider all opportunities for Eicher. If there’s any opportunity for us on this kind of scale that you’re talking about — we’re not talking about a 10-people outfit which we may buy like Harris performance to get some good brains, but for anything large — I have basically one filter. I don’t think we will do an acquisition where we think we can only incrementally improve it.
We have so much opportunity in Royal Enfield itself, so we’d just conserve energy for that. If something comes up, where I can credibly say that we can recreate the same story that we had for Royal Enfield over the last 10 years, then it’s something worth rolling-up our sleeves and putting in our time, effort, energy, blood, sweat, pain, crying all of that.
How do you monetise the brand? A lot of iconic auto brands sell accessories to generate revenue.
Yes, absolutely. We have a very strong filter about how we would like to monetise our brand. It has to serve our huge audience of customers and give them a better motorcycling experience. You don’t want to juice the brand Royal Enfield, you want to add to the brand. We’ve done apparels and accessories and both the businesses are profitable.
Now with a few hundred or thousand rupees you can become a Royal Enfield owner because you own a lovely collaboration T-shirt. And then hopefully over time you’ll buy a motorcycle as well.
In India you are an upgrade option whereas in international markets you are value-for-money. How do you reconcile these two brand identities?
This is something we have worked on a lot. We’re not positioned as a cheap brand anywhere in the world. We don’t sell on price. You will never see us saying, “Here’s a bike at a low price, here’s a discount.” That’s what cheapens brands eventually, right? We are an alternative brand. We offer an alternative world view to our customers. Certainly, it’s good value, it’s at a good price.
A lot of the reviews in the UK are something like this: “Do I really need to pay double for a bike that’s about the same? Sure, some of the options have more bells and whistles, but do I need those? Do I need cornering ABS, traction control? Maybe not.” They are asking that question very hard to themselves. Basically, the bike excels at essentials and that was always our idea.
They’re asking this question not because it’s cheap, but because it’s also very unique and quirky. We do a lot of brand story. We’re always talking about the brand story. We’ve got rides and events. So, it’s not just a bike which is lower priced that you grudgingly buy. It’s an amazing bike and amazing offering and amazing brand.
Q. Electric motorcycles have yet not been a commercial success anywhere in the world. What can you do differently?
The way we’re working on EVs is that we are not going to be the first to the market. But rather we’d study the market, understand the technology – there’s a full team at Royal Enfield who does EVs now. We’re constantly studying the market, riding bikes, making our own mule bikes, prototype bikes and riding them ourselves, seeing what happens, seeing what we like, don’t like.
You’ll certainly see stuff from us on EV like concept bikes and prototypes. But you’re not going to see a production EV from us for another three years or so at least. It might be longer. We’re in a tearing rush to work on it and to develop, but we’re not in tearing rush to be in the market and do a silly job.
