Excited by demand, but production remains a challenge: Royal Enfield

Top officials of Royal Enfield (RE), the motorcycle making arm of Eicher Motors, on Thursday said in a post earnings call with reporters that despite the rapid recovery in demand seen across all the key markets of the company, the coronavirus (Covid-19) pandemic-induced lockdowns have been impacting production.

The online inquiries for the company's bikes have increased three to four times compared to the pre-Covid-19 levels. There is a lot more to the recovery than just the “pent-up demand” as the bookings are holding up, they said.

 “The uncertainties continue, but things are looking up on the demand side for motorcycles and it is expected to catch up soon in commercial vehicles," said Siddhartha Lal, MD and CEO at Eicher Motors.

Eicher Motors (including Volvo Eicher Commercial Vehicles) registered its first-ever net loss of Rs 55 crores in at least a decade against a net profit of Rs 452 crore. The performance was dragged down by the core commercial vehicles business.

“Towards the end of the quarter we’ve witnessed encouraging consumer sentiment which was evident in our sales for the month of June. We believe that this trend will continue into this quarter as well," said Lal, adding that the motorcycle business was doing very well in international markets.

 

Royal Enfield sold 58,383 motorcycles during the June quarter, down 68 per cent from 181,966 motorcycles sold over the same period in FY20.

“We are quite excited on the demand side, but frustrated on the production side,” said Vinod Dasari, CEO, Royal Enfield.  The company is presently operating at 50 per cent of its installed capacity and has a backlog of 40,000 orders. The situation is improving gradually, but there is unlikely to be a major improvement, he said alluding to production.

Led by a strong preference for personal transportation and pent-up demand, most of the other two-wheeler makers including market leader, Hero MotoCorp, Honda Motorcycle and Scooter India, TVS Motor and Bajaj Auto are also seeing a rapid recovery in month-on-month sales, but have been relatively lesser impacted by the production related issues. Most are hoping to touch the pre-Covid-19 levels either by end of the current month, or by September.  

Dasari said RE produced 20 per cent more motorcycles in July compared to June and August will be the same.

 

Meanwhile, the company is working on electric motorcycles and will make its plans public soon, he said. “It’s not a question of whether, but when we do it,” he said. "The company is in the process of identifying the segments for the same and adding to the team. You will hear about it soon,” he added.

Speaking on RE’s international business, Lal said it is doing extremely well, led by the modern 650 Twin motorcycles and the Himalayan. The Interceptor 650 has been the highest selling motorcycle in the middleweight segment in the UK for the last one year, he said.

The commercial vehicle business, however, remains a drag and has yet to show any signs of recovery, Dasari said.