Moneycontrol Pro Panorama | Going premium the trump card for automakers, courtesy Eicher

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Eicher Motors, the maker of Royal Enfield motorcycles, is leading gains in Nifty 50 stocks in an otherwise flat equity market. The stock gained 4 percent in Wednesday trading after the company reported strong results for the December 2022 quarter. Its results are distinctly better than other two-wheeler companies’ earnings.

Sales volumes dropped at Hero MotoCorp and Bajaj Auto, both from a year ago and on a sequential basis. Total two-wheeler volumes at TVS Motor Co were unchanged from the year-ago quarter. In comparison, motorcycle volumes at Eicher Motors grew by a robust 31 percent from a year ago.

While discussions in earnings calls of Hero, Bajaj and TVS were focused on demand headwinds and the two-wheeler market recovery, Eicher alluded to strong demand for its products. Its newly launched Hunter 350 is seeing strong demand and driving market share gains.

Customer enquiries and booking rates of other new products -- Meteor 650 and the New Classic -- are “encouraging”, the management said. Importantly, the company sees good sales potential for Hunter 350 and Meteor 650 models in international markets. “New products will continue to be key growth drivers and the company has a slew of launches in the pipeline,” writes Nitin Agrawal in this piece.

The commentary and success of new products set Eicher apart. Unlike Hero, Bajaj and TVS, which largely sell mass market products, Eicher focuses on mid-market and premium motorcycles. The latter category of products are seeing better sales, helped by premiumisation and replacement demand. Mass market motorcycle sales have been hobbled by weak demand conditions in rural and semi-urban regions.

Similar trends are visible in the passenger car industry. The utility vehicle heavy Strong dollar fuels wave of emerging market currency devaluations (M&M) and Tata Motors clocked superior passenger vehicle sales growth in December 2022 quarter on a year-on-year scale compared to Maruti Suzuki India. M&M and Tata Motors are ahead in launching new utility vehicles and are benefiting from the rise in demand for these vehicles. But demand for entry level cars, where Maruti has a strong presence, is lagging.

Healthy demand and success of new models can help Eicher register the highest ever Royal Enfield motorcycles sales in the current fiscal year, projects Jefferies India. Still, investors should keep an eye on competition. Hero and Bajaj are reportedly preparing to launch premium vehicles in the 250 CC segment with their overseas partners. Stronger-than-anticipated success of these models can hurt Eicher’s market share, warn analysts at Nomura.

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Technical Picks: Power Finance Corporation, ICICI Bank, Poonawalla Fincorp, Mentha oil and ICICI Bank (These are published every trading day before markets open and can be read on the app).

R Sree RamMoneycontrol Pro