Early shift to electric could make Royal Enfield the global market leader

RE, a division of Eicher Motors, has made significant inroads into the global mid-range (250–750cc) touring/cruiser market. It has established a reputation for making good petrol bikes and has deftly leveraged its century-old brand to capture global market share.

RE exports crossed one lakh in FY23, with 1,00,055 bikes sold overseas. It is targeting 10% marketshare in the global mid-range segment and is already close to achieving the same with an estimated market share of 1.1 million (11 lakh) units. RE operates with a business model of fully knocked-down kits by retail outlets and local subsidiaries in four countries – Brazil, Argentina, Thailand and Colombia. About 14% in bike exports ( 2,080 crore) of sales in FY23.

The total sales volume stood at 8,34,895 units in FY23, representing a growth of around 39%. It has around 90% market share in the mid-size segment (which comprises around 8% of India’s motorcycle market).

Along with parent Eicher (which also manufactures trucks and tractors in partnership with Volvo), the company’s financials are looking good. 905.60 crore in Q4. Eicher’s quarterly revenue breaks record 3,804 crore, up 19.1%, while EBITDA margin climbed 23.3%. 934 crores.

The premium motorcycle segment has witnessed a growing interest, which RE has efficiently exploited with a series of new model launches including the 650cc cruiser segment and the classic 350cc Bullet.

Royal Enfield has been in existence since 1901 and claims to be the oldest motorcycle brand in continuous production. A manufacturing plant was set up in Madras (now Chennai) in 1955. Eicher bought Enfield India Limited in 1994 and renamed it Royal Enfield Motors Limited. The company says that it plans to launch one model every month on an average for the next few years.

RE has over 500 people working on R&D at two facilities in the UK and Chennai. But electric motorcycles constitute a very distinct design segment, with their own supply chain and repair and maintenance services. The powertrain is built around a battery, which means different ride and balance factors. The supply chain of components is also quite different.

Eicher to buy 10.35% stake in Spanish electric motorcycle maker Stark Future SL in December 2022 with an initial equity investment of 50 million euros. Stark launches its innovative class motocross EV bike in 2021 to rave reviews. Bike functions and parameters can be monitored and customized with an Android smartphone.

For RE, this partnership is an initial step towards EV and provides it with a collaborative foothold in R&D for electric motorcycles as well as future technology sharing, licensing and manufacturing options. It is likely that RE and Stark will use the same – or similar – EV platform and architecture in the future. For Stark, which is a smaller boutique, the partnership will help with industrialization and scaling.

RE’s turnaround (Enfield India was grappling with quality-control issues when Eicher bought it in 1994) has been based on simultaneous improvements in multiple variables. Eicher streamlined quality control and greatly advanced the design.

The current bike lineup includes variants of the Hunter 350, Classic 350, Meteor 350 Cruiser, 650 New Super Meteor 650, Interceptor 650 and Continental GT 650. RE also offers scramblers like the Himalayan adventure tourer and the Scram 411 ADV crossover and of course, the Bullet 350.

It also continuously worked to strengthen the brand. The Bullet has always been the preferred bike for the defense and police departments and had a great reputation among two-wheeler enthusiasts. Eicher built on that and created a range of branded accessories, apparel, biking gear and merchandising that now generate (roughly) 14% of RE’s revenue. 2,000 crores).

RE has the demographics – 72% of its customers are in the age group of 18 to 35. It has sponsored and developed an ecosystem called “Pure Motorcycling” to attract riding enthusiasts with events such as the three-day event “Ridermania”. Every year in Goa, and Himalayan Odyssey, a challenging journey through some of the scariest roads in the world.

According to the 2023 Global Auto Report, this approach has made RE the fourth strongest global auto brand. It is the only two-wheeler brand in the top 10. The shift to EVs is quite compelling given the evolution of personal mobility and the dynamics of emission control legislation. By doing this relatively quickly, RE can accelerate its quest to capture global market share. If it gets the engineering and branding right, it can become a leader in the global market.