Royal Enfield aims to claim pole position in mid-sized bikes globally

Its presence abroad currently is either through exclusive stores or multi-brand outlets; It now seeks to set up CKD units in priority markets in APAC and LatAm region

Royal Enfield, the motorcycle making arm of Eicher Motors, envisages being present in all the relevant markets of the world over the next decade, as part of its strategy to straddle the midsize segment of the motorcycle market globally, said company’s top official.

“Our main objective is to become a global player, be present in all the relevant markets around the world. Wherever there is potential for mid-size, we will be there and will be number one in midsize markets globally. We will be present in all the relevant markets over a decade or so. That’s the plan in the coming years,” Siddhartha Lal, Managing Director, Eicher Motors said at the post earnings call with the media on Wednesday.

Royal Enfield currently has presence in North America, UK, Europe, UAE, Asia Pacific and Latin America, either in the form of exclusive stores or multi-brand outlets. It recently opened a flagship store in Tokyo, as part of a plan to step up presence in the Asia Pacific Region. It is “evaluating opportunities” to set up completely knocked down (CKD) units in priority markets in APAC and LatAm region and recently set up one such in Argentina, as per investor presentation on company’s website.

Vinod Dasari, chief executive, Royal Enfield said, during the December quarter, the company opened 13 flagship stores in international markets taking up the total count to 98. It plans to take it up to 100 by end of FY21, according to the presentation.  “Our overall experience in the international market has been pretty good,” said Dasari adding that the long term goal is to have at least 20 per cent of the revenue coming from international markets. It accounted for 9.1 per cent of the revenue in FY20.

 

Royal Enfield sold a total of 199,000 motorcycles in the December quarter, a 5 per cent year on year on increase. Of this, exports advanced 29 per cent. Though the company has been ramping up production of the bikes to feed the strong demand across the country, the supply chain related issues caused by the global shortage of semiconductors has been impacting the ramp up, said Dasari.

The “low cost and high margin approach” to entering the markets has been very gratifying, said Lal. Most companies that enter international markets make big investments in either new products for different markets, new plants or substantially evolved products. But Royal Enfield is not doing either. The company is developing new products with an eye on international markets. For instance, the Interceptor has identical models going across the world. Therefore, there is no additional capex going in for entering the new markets.

Instead of making investments in setting up a facility or product specifically developed for overseas markets, the company has chosen to invest in market development in countries it has identified as strategically important.  In some cases it has marketing companies. For instance, in Europe, North America, Thailand and Brazil Royal Enfield has a whole team engaged in marketing, service and distribution. But in countries like Japan it has entered through a dealer to keep the costs low. Once it establishes in Central Tokyo, it will go to rest of Japan, explained Lal.   

In some ways, Royal Enfield’s market entry strategy for markets outside India is akin to Bajaj Auto. The country’s largest motorcycle exporter that ships its models to over 40 countries too has been expanding its presence globally, using a step-by-step approach with a varied approach to each market.