Royal Enfield is the only two-wheeler brand headquartered in India that has never done an acquisition. But, that could change as its parent company is said to be keeping a keen eye on opportunities coming its way.
Though the Eicher Motors-owned company never officially admitted to have participated in the race to buy Volkswagen-owned, race bike making company Ducati three years ago, media reports said that the niche bike maker was one amongst the bidders.
Siddhartha Lal, Managing Director - Eicher Motors, said, “EML is not a very acquisitive kind of a company, it is not our core business model. Having said that, we always keep our eye and ears open and certainly that this time we will keep them even more open because there are more opportunities out there and we certainly process a lot of opportunities.”
Lal was referring to the dip in company valuations throughout the world due to the impact of the coronavirus on operations. During the peak of the pandemic in Europe, TVS Motor Company bought business assets of UK-based 100-year-old bike brand Norton for Rs 153 crore in April.
Royal Enfield specialises in a very small sub-segment of the two-wheeler industry. The company wants to become the world-leader in the ‘middle-weight’ bike segment (categorised as motorcycles having engines between 350cc-750cc). Over the years, it has tried experimenting with variations but the strategy did not deliver expected results.
For instance, Royal Enfield’s entry into the adventure segment with the Himalayan or with the modern retro (Café Racer) segment with the Continental GT 535 have produced lukewarm results. More than 65 percent of Royal Enfield’s volumes came from just one model Classic 350 as at the end of FY20. It has also phased out the 500cc engine option on each of its models such as Thunderbird, Classic and Bullet while only the 350cc remain.
The company remained committed to the middle-weight category of bikes with the launch of the 650 twins – Continental GT and Interceptor – done in November 2018. It is yet to have any new model launch (that is not a variant or upgrade) since then.
“I believe we have an extremely high bar in terms of what we need to put our energies on. Anything that takes time and energy of the management, only if it makes a very strong and strategic sense, has an extremely strong bearing which can take our business to the next level will be considered. We are not into small acquisition”, added Lal.
While Bajaj Auto was among the first Indian two-wheeler companies to buy stakes in an overseas two-wheeler maker KTM this was followed by Hero MotoCorp buying nearly half of US-based Erik Buell Racing.
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