 "Royal Enfield, Siddhartha Lal")
For years Eicher Motors' Thiruvottiyur, Chennai plant huffed and puffed to keep up with the demand for the Royal Enfield (RE) motorcycles that rolled out of it. New models kept being added to the century-old brand that captured the imagination of thousands of buyers.
Even after the addition of a new plant in 2013, showroom salesmen still warn of an average waiting period of six months.
With demand outstripping supply, RE, according to data from the Society of Indian Automobile Manufacturers, grew sales by 64 per cent in April, 2014-January, 2015 to 261,000 units, even as the two-wheeler sales grew by a mere 4 per cent to 9.10 million units.
But runaway demand is not one of the "risks and concerns" that Eicher outlines for the brand. The loss of customer satisfaction and brand image due to quality issues and new players entering RE's domain are.
Problems at the door
While Eicher was busy ramping up, quality and service took a beating. Owners' complaints about engine heating, inefficient rear brakes, rust and paint issues, oil leakages and clutch failure kept mounting.
"We are a bit under-invested in our R&D. In the last couple of years, even though we have been growing tremendously, our organisational effort has been to create teams, create talent and create capacity...it is not that we have not been putting R&D assets but the main thrust...has been to create motorcycle capacity, sales capacity, supplier capacity, service capacity, spare parts capacity", Siddhartha Lal, managing director and chief executive, Eicher Motors, said in an earnings call.
Lal clarifies now, "At our new plant, we have managed to check and rectify many of these problems at the manufacturing process itself. Our UCE platform with modern aluminium engine has significantly less oil leakages, for example. We have revamped our service network with better trained staff and tooled centres."
Eicher will invest Rs 500 crore in product development and setting up two technology centres in Chennai and UK. From legacy handcrafted processes, RE will increasingly switch to automation, reducing errors. The UK tech centre will be ready by the end of this year, while the Indian centre will be ready by the second quarter of 2016.
Competition gets ready
RE has made the most of a lack of direct competition so far. But the Pune-based Bajaj Auto is injecting new life into its sole cruiser, Avenger, to take on RE. Born of a technical wedlock between Bajaj Auto and Japan's Kawasaki (known as the Eliminator, then), the Avenger will be seen in a new avatar in the coming weeks. It would compete with RE bikes in terms of make and pricing.
In the cruiser/tourer category, most two-wheeler companies don't have bikes to rival RE with similar pricing (see box). To hang on to its first-mover advantage, RE now has new retail formats like concept stores in New Delhi, London Bogota and Medellin in Colombia. These would also take its global market expansion forward.
People skills
With Eicher nursing global ambitions for RE in mid-sized motorcycles (see box), it has infused fresh talent to rev things up. It recently roped in the former head of design at Ducati, the Italian bike brand (now under Volkswagen). Pierre Terblanche, who has created some "extraordinary motorcycles" according to Lal, will mentor the industrial design team at RE. Lal says, "The brand needs people who don't just have core competencies but the right way of working if we are to become a global leader in mid-sized motorcycles. Our European and American consumers love our Classic and Continental GT. With veterans like Terblanche, we can meet the design preference of a global motorcycling enthusiast."
To spruce up its marketing, Eicher has signed on an RE enthusiast and seasoned marketer, former Unilever vice-president of South Asia Rudratej Singh as president of RE, even though he has no automobile experience. "We wanted someone with a progressive mindset about marketing which is rare in the automobile fraternity," says Lal.
Next up would be a new set of engines. These new engines will be mid-sized, ie. above 250cc, but below 750cc. "We have one single engine with three variants - 350cc, 500cc and 535cc. We plan to have at least two more platforms in the next two to three years," Lal told analysts earlier.
THE RE NICHE
RE does not have direct competition in its segment - a leisure bike which is not an all-out cruiser. While in India, it is a premium bike brand (pricing and engine capacity), in worldwide rankings, it is known as a mid-sized brand, with engines from 350cc to 850cc.
The iconic British bike brand Triumph that is RE's closest competitor, but with a bigger cult following, has no plans to bring down its entry price-point in India.
The US-based Harley-Davidson launched a budget cruiser last year priced more than twice of the RE Classic 500, a top-seller.
