Royal Enfield does not need a partnership either for technology or for manufacturing of motorcycles, said Siddhartha Lal, managing director and chief executive officer of Eicher Motors, after Bajaj roped in Triumph for products development. Lal said there was no need for Royal Enfield to have a partner at this point. Royal Enfield dominates the domestic mid-size motorcycle market (250-750cc).
“There is certainly no partnership required. It is not from either technology or manufacturing or distribution. Therefore, if you look at the three aspects of the business — marketing distribution, manufacturing, and technology — we do not need a partner now. It is not a desperate need. I mean, not even desperate, it is not even a real need, let us put it that way,” Lal said recently, when he was asked about a need to partner another company in the context of Bajaj Auto’s partnership announcement with Triumph, a British motorcycle brand.
Bajaj and Triumph will together produce mid-capacity bikes for the Indian and overseas markets. Engineers from Bajaj Auto and Triumph have been working on the new motorcycles at the former’s Chakan plant for some months. The no-equity partnership will develop a range of mid-capacity 250-750 cc motorcycles to grab the share of this fast-expanding segment, dominated by Royal Enfield. Bajaj Auto in December launched Dominar with a 373 cc engine to take on mid-capacity market leader Royal Enfield, and it currently sells about 1,100 units a month. Royal Enfield’s monthly average is 3,200 units in 350-500cc segment. It gets the bulk of sales from the 250-350 cc segment where it has about 99 per cent share.
Lal said the kind of work Royal Enfield is doing in product technology and development over the past two-three years does not warrant the need for a partner.
He added that the products from this work is yet to hit the markets. “That is the reason we have been investing so much in our facilities and in our teams in the UK and also in India. Right now, there is no need for Royal Enfield to have a partner let us say for those purposes,” he said.
The company is setting up two tech centres for product development in the UK and India.
Royal Enfield is a high-margin business for Eicher, giving it an (earnings Before interest, taxes, depreciation and amortisation) Ebitda margin of 31.3 per cent in FY17, a benchmark in the Indian automobile industry. The absence of a formidable competition in the segment and future growth potential have recently made Eicher the most valued two-wheeler maker in the country with a market cap of Rs 85,624 crore, ahead of Bajaj Auto’s Rs 81,477 crore. “We continue to do what we do, which is to give extremely well-designed and relevant, in terms of performance. So, these are not over fast bikes, people want a mix of low in torque and good fuel efficiency in India. And of course at the price points at which we can grow the market,” said Lal.
Royal Enfield recorded its highest ever quarterly sales volume of 183,731 motor cycles in April-June quarter, growing 25 per cent over the same quarter last year. The company has been expanding its retail footprint and had 700 retail stores as of June end in the country.
Siddhartha Lal, managing director and chief executive officer of Eicher Motors