)
Eicher Motors’ profit and stock price recently touched a record high. Siddhartha Lal, managing director and chief executive officer, tells Ajay Modi they'd like to grow the market in India and to further their foray abroad. Edited excerpts:
Eicher reported its best profit of Rs 213 crore in the January-March quarter. Can this be sustained? At the group level, which segment is contributing more?
There are forces that help us and also pull us the other way. If we continue to grow at a similar pace like last year, profit should not be an issue. The new areas of retail, accessories and focus on markets abroad will lead to increases in fixed cost. The weight of revenue comes from trucks but profit is coming largely from motorcycles. The truck market has been under pressure but is looking up.
Your stock has been surprising the market. Is there more steam to it?
Our focus is on performing well to reach closer to our potential. Stock movement is the outcome of the work we do. We are at a very early stage of Royal Enfield’s (its motorcycle subsidiary's) potential. Our growth is on the basis of one family of motorcycles in one market (India). In India, we have only about three per cent of the motorcycle market. Globally, our share is negligible. We believe we have reached one level and are working on the next one.
The market is seeing entry of more players. Can you retain the current market share?
When you are at 95 per cent share (of the middleweight motorcycle market), there is probably only one direction you can move. Our aspiration is not to hold market share; neither will we hand out share. We want to grow the market. If the market grows five-fold or 10-fold and even if our share drops, we will be delighted.
As your motorcycles are priced significantly higher than commuter bikes, what is driving the acceptability?
Overtime, people have found a need to have a more engaging commuting experience on motorcycles. Riders want the flexibility of using motorcycles for long-distance leisure purposes. Youngsters want an all-purpose motorcycle. On affordability, salaries have gone up and young professionals can afford our motorcycles on monthly instalments.
Where is your domestic growth coming from -- cities or smaller towns?
In the rapid growth of the past five to seven years, the big push came from the top seven cities. While the big cities continue to grow, we now see growth coming from smaller towns as well. We plan to add 100 dealerships in 2015 to the 400 (as of 2014-end) existing ones and half of the addition will be in smaller towns.
What challenges will the company face as it grows?
To increase our presence in India is an enormous task and we are working on it. We think the middleweight motorcycle market (250-750cc) can be much bigger. The challenges are to make a significant breakthrough internationally. We are not on a roll in any market outside India. We had not focused much. Now, we have the ability and capital to do so. Currently, the US is the biggest international market but we are also growing in UK, Germany, France, Colombia.
What prompted you to venture into biking gear? What is the idea behind the online platform?
Long-distance riding is becoming part of the Indian culture. There was a distinct lack of really good riding gear. We wanted to address this through protective gear in the form of boots, helmets, jackets, etc. There has been a soft launch of the online store. We have a reasonably wide range and a small dealer can’t carry the entire inventory. People can order online and get it delivered.
Eicher reported its best profit of Rs 213 crore in the January-March quarter. Can this be sustained? At the group level, which segment is contributing more?
There are forces that help us and also pull us the other way. If we continue to grow at a similar pace like last year, profit should not be an issue. The new areas of retail, accessories and focus on markets abroad will lead to increases in fixed cost. The weight of revenue comes from trucks but profit is coming largely from motorcycles. The truck market has been under pressure but is looking up.
Your stock has been surprising the market. Is there more steam to it?
Our focus is on performing well to reach closer to our potential. Stock movement is the outcome of the work we do. We are at a very early stage of Royal Enfield’s (its motorcycle subsidiary's) potential. Our growth is on the basis of one family of motorcycles in one market (India). In India, we have only about three per cent of the motorcycle market. Globally, our share is negligible. We believe we have reached one level and are working on the next one.
The market is seeing entry of more players. Can you retain the current market share?
When you are at 95 per cent share (of the middleweight motorcycle market), there is probably only one direction you can move. Our aspiration is not to hold market share; neither will we hand out share. We want to grow the market. If the market grows five-fold or 10-fold and even if our share drops, we will be delighted.
As your motorcycles are priced significantly higher than commuter bikes, what is driving the acceptability?
Overtime, people have found a need to have a more engaging commuting experience on motorcycles. Riders want the flexibility of using motorcycles for long-distance leisure purposes. Youngsters want an all-purpose motorcycle. On affordability, salaries have gone up and young professionals can afford our motorcycles on monthly instalments.
Where is your domestic growth coming from -- cities or smaller towns?
In the rapid growth of the past five to seven years, the big push came from the top seven cities. While the big cities continue to grow, we now see growth coming from smaller towns as well. We plan to add 100 dealerships in 2015 to the 400 (as of 2014-end) existing ones and half of the addition will be in smaller towns.
What challenges will the company face as it grows?
To increase our presence in India is an enormous task and we are working on it. We think the middleweight motorcycle market (250-750cc) can be much bigger. The challenges are to make a significant breakthrough internationally. We are not on a roll in any market outside India. We had not focused much. Now, we have the ability and capital to do so. Currently, the US is the biggest international market but we are also growing in UK, Germany, France, Colombia.
What prompted you to venture into biking gear? What is the idea behind the online platform?
Long-distance riding is becoming part of the Indian culture. There was a distinct lack of really good riding gear. We wanted to address this through protective gear in the form of boots, helmets, jackets, etc. There has been a soft launch of the online store. We have a reasonably wide range and a small dealer can’t carry the entire inventory. People can order online and get it delivered.
