Two-wheelers rev up for mid-size battles amid rising competition

Royal Enfield has made aggressive moves in the 250-350 cc segment that it dominates, but the competition is accelerating

On August 7 this year, iconic motorcycle maker Royal Enfield launched the Hunter 350 at a price range between Rs 1.5 lakh and Rs 1.7 lakh, depending on the variant. That makes it the cheapest bike in the Chennai-headquartered major’s J-platform, the base design for the new 350 cc engine that debuted in November 2020 with the Meteor 350 (Rs 2.28 lakh).

Royal Enfield already dominates with a 93 per cent share in this mid-size motorcycle segment that the Society of Indian Automobile Manufacturers (SIAM) defines as greater than 250 cc and up to or equal to 350 cc. It sells the Classic 350 (Rs 2.21 lakh), Bullet 350 (approximately Rs 1.8 lakh) and Meteor 350. A fourth model will only give the firm more traction here. With its competitive pricing, the Hunter aims to attract first-time buyers.

Royal Enfield’s focus on this segment makes sense: SIAM data shows that sales here have been advancing at a fast clip month on month even as the broader market has slowed down. Between January and October of this year, the overall two-wheeler market has grown just 8 per cent, roughly the same in the comparable period last year, according to an analysis by Auto Punditz. But mid-sizers accounted for 250,777 units in the same period last year, the figure this year jumped to 410,206 units, a 63 per cent growth.  

No surprise, then, that other two-wheeler majors are crowding into this segment even as Royal Enfield is firing on all cylinders to defend its market share. Over the next 12 to 24 months, the segment will see the entry of models from several players. One of them is a co-developed model from Hero MotoCorp and Harley Davidson. With Harley seeking to make a second comeback in the Indian market, it, too, is looking at an “affordable bike”. Bajaj Auto and Triumph Motorcycles, also a second coming, are planning to launch a jointly developed model by 2023. Honda Motorcycle and Scooter India’s CB350, Kawasaki Ninja, TVS Apache RR310 are some of the models in the segment.

If the initial sales clocked by the Hunter are any indication, there’s enough and more appetite among buyers to lap up newer models. Within just three months, Royal Enfield has sold more than 55,000 units of the Hunter with average sales of over 18,300 units per month.

Analysts believe that though the volumes are encouraging, it’s coming at the cost of other models in the segment. Also, with its affordable pricing the model may be margin dilutive.

“Though the management is saying that there is no cannibalisation between Classic and Hunter, if you look at the volumes between the two, Classic has stagnated for a while now. There is some sort of cannibalisation that is happening within the two models,” said Aniket Mhatre, research analyst at HDFC Securities. Hunter 350 uses the same engine as Classic 350 and Meteor 350.

Royal Enfield, however, claims that the Hunter 350 with its competitive pricing is bringing in a whole new set of customers. The proportion of first-time buyers, which used to be normally about 15 per cent, has jumped to 18.1-18.2 per cent this year after the Hunter launch, B Govindarajan, chief executive officer of Royal Enfield, said in a post earnings investor call last week. The relatively cheaper Hunter 350, he explained, was meant to bulk up volumes, and it has done so quite well.

“It has started giving us a higher volume and is not cannibalising the existing model, which is number one,” Govindarajan added.

Around 40 per cent of buyers for the Hunter 350 are in the 18 to 25 age group and about 43 per cent are in the 26 to 30 age group, according to the company.

“The premium category is doing much better than the entry-level vehicles in the motorcycle space. Because of the launch of Hunter, which is at a lower price point, customers who were waiting on the side-lines are also looking at it. Classic 350 has seen a very sharp price increase in the last one-and-a-half to two years, which led to some degree of slowdown for that product,” Mhatre added.

What many highlight as a positive is the price advantage that Hunter enjoys over its rivals. Starting at Rs 1,49,900 for the retro variant, the higher Metro version is priced up at Rs 1,68,900. On the other hand, its popular rival Honda CB350RS, is priced at Rs 2,03,800, the Yezdi Roadster (between Rs 2,01,142 and Rs 2,09,142) and the Jawa Forty Two (between Rs 1,67,487 and Rs 1,81,357).

Encouraged by its success in India, starting this month, Royal Enfield plans to start selling the Hunter in Asia-Pacific countries. This will be followed by Europe, West Asia, and Africa.

But as the competition for 350cc motorcycles accelerates, it would be interesting to see whether Royal Enfield’s latest product offensive is able to maintain pole position or yield to newer entrants.

Top Gear

8 per cent: Growth in two-wheeler market between January and October this year

63 per cent: Rise in mid-size segment during the same period — from 250,777 units last year (Jan to Oct) to 410,206 units this year

55,000: Total units of the Hunter sold by Royal Enfield so far

18 to 25 years: The age group that accounted for 40% of Hunter customers

26 to 30 years: The age group that accounted for 43% of Hunter buyers

18.2 per cent: Proportion of first-time buyers for RE, increasing from 15 per cent prior to the Hunter launch