Eicher Motors lines up Rs 500 crore capex for FY22 but warns of chip shortages

At around 44,000 units in July, Royal Enfield, the leisure bike brand, is operating at almost half its optimum output, which is at 80,000 units a month. The brand has been unable to increase production due to a chip shortage, which has also forced it to defer the launch of new products. (Image: Royal Enfield)

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26 Aug, 2025 12:21

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Eicher Motors, maker of Royal Enfield motorbikes as well as VE trucks and buses, has readied capital expenditure of a little over Rs 500 crore for FY22. But supply chain shortages, including a shortfall in semiconductors, are preventing the company from ramping up production, said Siddhartha Lal, Managing Director, Eicher Motors,

“The demand situation looks promising. We will be growing our supply situation in October-November. Production will not be as much as we would have liked because of chip shortages, which will continue into the second half. But we will see an improvement in the next quarter,” said Lal.

At around 44,000 units in July, Royal Enfield, the leisure bike brand, is operating at almost half its optimum output, which is at 80,000 units a month.

The brand has been unable to increase production due to a chip shortage, which has also forced it to defer the launch of new products.

“We had a capex of just over Rs 500 crore last year and we are looking to have a similar amount for this year. There are shortages and they are affecting our plans but it’s not by a tremendous amount. We don’t have any major issues. There may be a couple of months' delay in launches due to supply issues,” Lal added.

The semiconductor shortage has made the auto industry cut down on production and even take unscheduled production holidays. Suzuki Motor Gujarat (third-party manufacturer for Maruti Suzuki), Mahindra & Mahindra, Renault, Nissan and Ford are some of the companies that were forced to shut production due to the chip shortage.

Pune-based Bajaj Auto has also lost production of the KTM range of bikes due to the semiconductor shortage.

Though he did not provide a specific number, Lal claimed that Royal Enfield is sitting on a ‘very good’ order book but it will not be executed in time for the festival months.

“We have an order book we can’t fully execute for the festive season. This is pretty obvious to us now,” Lal added.

Royal Enfield sells motorcycles under six brands — Bullet, Classic, Meteor 350, Himalayan, Continental GT and Interceptor 650 — in the domestic and global markets. The last new-model launch by the brand was the Meteor 350 in November 2020.

Lal added that Eicher Motors will have to relook at price hikes if raw material prices begin to inch up again. The company increased prices in July to negate the impact of the input cost rise. Raw material prices, however, have started to taper off, noted Eicher Motor executives.