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Last Updated : Aug 05, 2016 10:56 PM IST | Source: CNBC-TV18

Eicher's chief doffs hat to Rajiv Bajaj, eyes 30% margin growth

Currently, the company is mainly focusing on building a future for Royal Enfield, says Siddhartha Lal, Managing Director and CEO of Eicher Motors.


In order to make Eicher Motors a better bike brand, the company’s MD and CEO Siddhartha Lal has done what was needed: hired talent from around the global companies, including Harley and Triumph, and visited Bajaj's Chakan plant to understand how a bike plant works.

Not just this, he credits Rajiv Bajaj, MD of Bajaj Auto, for making Eicher what it is today.

In an interview to CNBC-TV18, Lal said Eicher and Bajaj make totally different motorcycles and a lot of new and interesting motorcycles are under development.

However, Lal said that the company's main focus is to build a future for its key bike Royal Enfield. According to him, the last few years have been transformational for the company and margins would improve beyond 30 percent going forward.

The company is targeting to produce 9 lakh units by 2018-2019 and has recently commissioned phase-II of Oragadam Plant, Lal added.

Below is the verbatim transcript of Siddhartha Lal’s interview to Sonia Shenoy on CNBC-TV18.

Q: What are your targets as far as production is concerned?

A: We are targeting to get to around a 900,000 number by 2018-2019. That is from a production standpoint, how many we will sell we don't know. We are not forecasting that, but production wise this plant that you see right here, this is Oragadam, phase one we call it because this was set up for around 250,000-300,000 units per year. There is an adjoining paint shop that side. We have commissioned and it is running, phase two.

So, that is also producing motorcycles. So, combine this factory along with Thiruvottiyur when it is all fully up to seam. So, phase two still coming up will give us in the order of 650,000-700,000 motorcycles. And then we have Vallam Vadagal coming up which is our third plant and phase one of that will give us another 300,000. So, that takes us to 900,000 in FY18-FY19.

Q: And in terms of new launches a lot of bike enthusiasts have asked me when the next 750 CC is coming out because of the spy pics as you know that have been doing the round. Can we hope to see something soon?

A: We have a lot of new motorcycles under development. Many interesting things.

Q: Like?

A: That is the problem. We don't know which all are going to actually hit the road. So, even in the past what you are seeing here is one Himalayan and Continental GT a couple of years ago. But behind that was many other motorcycle as well which we killed because we didn't liked them for some reason or the other or they didn't meet our requirement. So, there is a fat pipeline and then there is models which you are going to see. So, you are going to see new and fun and interesting models but I just can't tell you when and where and how.

Q: Coming to your margins, 30 percent margin now, record highs for Royal Enfield, you feel things could get better?

A: Honestly when we were at 20 percent we thought we were there and we have done it all. Therefore, yes it could get better but is it our objective to get to 35 percent, I don't think that is our objective anymore. Now our objective is actually to spend more. More than that our objective is actually to create. So, we are doing the earning and we are getting damn good at earning and obviously at one level we continued to look at how to improve that earning. So, you have the potential on the topline, the gross margins, on the cost. All of that is work that we are already really good at and we are not going to let go off an opportunity there. But the important thing that we focus on is to actually build the future for Royal Enfield. So, to be able to actually make sure that we get all the actions in place. So, there has been an enormous focus on actually moving things forward. So, in the last couple of years there has been a transformation in Royal Enfield. We are recruiting people from around the world. We are recruiting people that wouldn't consider joining a company like Eicher Motors or Royal Enfield 5-7 years ago.

Q: You have hired from Harley, from Triumph, from all these big companies, right?

A: From across the board.

Q: Let me ask you about competition because your competitor Bajaj Auto has Rajiv Bajaj and I understand that the two of you share a great rapport. He told me that the one thing he learnt from you is that less is more and focus on one thing and do it right. But I want to understand how do you guys manage to be such good friends despite being competitive in this industry?

A: Firstly just to give you an example, firstly we used to be in a - or let us say our mother plant is a small plant which was made in the 1950s up in the North Chennai and it is very different in nature to this plant and when we thinking about this plant it was something we couldn't even consider. So, actually me and my chief operations officer Govindarajan, a couple of us we went to Chakan and Rajiv let us have a look around so that we could fathom what a modern motorcycle plant could look like. So, yes, he has helped us tremendously even getting here and we have the same world view. We don't look at competition as - firstly we don't make motorcycles that have anything to do with each other.

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First Published on Jul 29, 2016 03:47 pm
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