Royal Enfield, India’s largest premium bike maker, will set up hundreds of compact ‘Studio Stores’ to reach out to the remote pockets of India; each of which will be inaugurated by a former member of the armed forces.
Through this cost-effective initiative, the Eicher Motors’ controlled company hopes to tap into buyers from the rural corners of the country as demand from the urban centres starts to taper off.
Speaking to Moneycontrol Vinod Dasari, CEO, Royal Enfield said, “The reason for building the compact store was to provide significantly greater accessibility both for sales and service. Our customers have said that, ‘You are good in the cities, but how can you help us in the country areas?’”
“So we had set up a plan to have 200-350 stores in this year. I am happy to inform that we are accelerating that plan and we should complete almost 500 by end of this quarter. Because of the proud association Royal Enfield has with the armed forces, every single one of them will be launched by an ex-army person”, added Dasari.
The average size of this store will be around 500-600 sq ft, which will be set up at an investment of Rs 5-6 lakh per store. In comparison, a regular Royal Enfield showroom is spread over a area of 2,000-4,000 sq ft that comes at a cost of Rs 50 lakh to Rs 3 crore, depending on the location.
Royal Enfield sold 181,966 motorcycles in the April-June quarter, which is a decline of 19 percent from the 225,286 motorcycles sold over the same period in the last financial year. Together with the poor performance of VE Commercial Vehicles, Eicher’s joint venture company with Volvo, Eicher recorded its worst margin show in 2-3 years.
The company’s net profit declined 22 percent during the same quarter to 452 crore as against Rs 576 crore.
Despite the slowdown, the company has refused to go slow on the capital expenditure plan for the current financial year, which remains at Rs 700 crore.
Siddhartha Lal, managing director, Eicher Motors said, “We are on track with the Rs 700 crore worth of investments this year. The investment was partly for the Vallam Vadagal plant, and partly for the new tech centre and rest for new products.”
After the end of March quarter, company officials had indicated plans of producing 950,000 motorcycles in FY20. Though volumes fell by a fifth during Q1, Royal Enfield has no plans to go slow on output.
“We will be able to produce 950,000 this financial year. We are looking at the demand position. In the first quarter it was weak we will see how that evolves, so that it still something which is unknown”, added Lal.
Bharat Stage VI emission norms, due to kick in from April 1, 2020, will push the end-prices of all vehicles higher, thereby further dampening demand, which has already been on the lower side because of tighter liquidity from the banks to the dealers.