Eicher Motors plunges 12% in 5 days as competition rises; key support level at Rs 3,000: Experts

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Eicher Motors' shares have plummeted by approximately 12 percent over the past five days following the announcement of new bike launches by rival companies, intensifying the competition in the market.

Both rivals Harley Davidson (in partnership with Hero MotoCorp) and Triumph (in partnership with Bajaj Auto) have launched cruiser bikes at extremely competitive and similar price points, which are marginally higher than Eicher Motors' best-selling Royal Enfield (RE) Classic 350cc.

The Harley Davidson X440, introduced by Hero and Harley, carries a starting price tag of Rs 2.29 lakh, while Triumph and Bajaj launched the Speed 400 and Scrambler 400X at a price of Rs 2.33 lakh.

Compared to Eicher Motors' RE Classic 350, the HD X440 comes at a 13 percent higher cost and features a larger 440cc engine. Royal Enfield, a long-standing leader in the premium bike segment in the country, is now facing a significant surge in competition that could impede its growth momentum. Industry analysts anticipate that the entry of new players into the market may challenge the monopoly of Eicher Motors' Royal Enfield, which currently commands a 90 percent share in the 350cc segment.

“The >250cc market may have space for 2-3 players. The high gross margins of RE at 43 percent, Rs 75,000 per bike, make the segment attractive for new players,” stated analysts at Nomura. Harley Davidson has always been an aspirational brand with models starting above Rs 5 lakh. With these new entrants, there’s uncertainty among market participants whether Eicher will continue to command premium valuation.

Brokerage firm Motilal Oswal said Harley X440's starting price is very aggressive. It ticks all the right boxes on paper to make it successful, it noted.

HDFC Securities has downgraded Eicher Motors from an 'add' to 'reduce' rating and reduced its target price to Rs 3,086 per share from Rs 3,715. According to the brokerage, Royal Enfield will need to reevaluate its product and pricing strategy as potential customers are now likely to consider brands like Harley and Triumph as formidable alternatives. HDFC Securities stated, "While we expect RE to adjust its strategy in response to the competitive impact on its market share, we anticipate continued pressure on margins in the short term."

Other analysts have also downgraded Eicher Motors. UBS reduced its price target to Rs 3,500 from Rs 3,650 while maintaining a neutral rating. The brokerage said that there is limited upside potential for both Bajaj and Hero Moto from these recent launches.

Shares of Eicher Motors ended 1.19 percent lower at Rs 3,184.45 a piece on the BSE on July 7.

On the technical front, Ratnesh Goyal, Senior Technical and Derivative Analyst at Arihant Capital, highlighted the chart patterns of Eicher Motors.

According to Goyal, the daily chart of Eicher Motors is exhibiting a double top formation and a breakdown of the lower trendline. The stock is currently trading below all the crucial moving averages, with Rs 3,000 serving as an important key support level for the upcoming week.

Goyal further explained that if the stock price falls below this key level, there may be additional selling pressure, potentially driving the price down to Rs 2,850. On the other hand, in case of an upside, major resistance is anticipated around Rs 3,300, above which the chart pattern will change.