Eicher Motors-controlled niche motorcycle maker Royal Enfield could be looking at having an assembly plant in South East Asia to get a bigger share of the global two million mid-segment bike market.
The Delhi-based company that makes leisure, cruiser and off-road bikes having engines of 350cc-650cc could be looking at having at least one manufacturing presence in Thailand, Indonesia, and Vietnam.
Speaking on the sidelines of announcing the fourth quarter results ended March Siddhartha Lal, MD & CEO, Eicher Motors said, “We are extremely bullish on Thailand and Indonesia. We have seen very good traction for Royal Enfield bikes in these market. We will have market companies with our own employees working there, where distribution will be done by us but dealers will be local. The idea is that it should be followed by local assembly but we are looking at different options."
Rather than investing in business assets such as a manufacturing plant Eicher Motors said it would explore the idea of contract manufacturing bikes in these countries with kits exported from India.
“Preference is to do contract manufacturing rather than make the bikes ourselves. From the taxation point of view, it makes sense to do assembly (then export fully-built units from India). If it works we could have something in Vietnam too," added Lal.
Currently, exports make up just for 2.3 percent of the Royal Enfield’s annual sales. Last year, just under 20,000 units were exported on a combined sales of 8.2 lakh units. However, growth in exports has been robust for the brand with last year’s growth being 25 percent over the previous year.
“In 24 months time exports should start pulling in some more weight by which time we will have an expanded product range and new capacities”, added Lal.
To accommodate its global and domestic ambitions Royal Enfield is speedily adding new capacity. The company is on track to augment output taking it to a total of 1.3 million units with the coming on stream of the Phase 2 expansion of its newest plant Vallam Vadagal in Tamil Nadu.
The expansion will add 3.5 lakh units to the total installed capacity of Royal Enfield. A capital expenditure of Rs 800 crore planned for this year includes this a brownfield expansion.
The brand closed last financial year with sales growth of 23 percent to 8.2 lakh units as compared to 6.66 lakh units clocked in 2016-17. The planned capacity for this year is 950,000 units.
“We will start production only in the second half of next financial year. It will help us (with new volumes) only in the latter half of that year” added Lal.
Earlier in the year, Royal Enfield unveiled two new bikes – Interceptor 650 and Continental GT 650 – targeted at the global markets as well as at India. These new bikes will be launched in a few months in India after they are launched overseas.“They will come out soon in the next few months. We are also waiting for them to come out we are sorting out ramping up issues. It’s only a matter few months. The Interceptor 650 is a new product but the Continental GT 650 will replace the current Continental GT that we sell in India," added Lal.