Despite making new additions to its product line-up, Royal Enfield closed FY19 with almost no growth in domestic volumes. Its motorcycle-making peers, however, pushed the segment to close with a growth of eight percent.
Domestic volumes of the Chennai-based manufacturer slipped 21 percent in April, the sixth consecutive month of decline. While the demand for its best-sellers like Classic 350 have stagnated with market watchers predicting brand fatigue, its share price has crashed 23 percent since November.
Siddhartha Lal, the managing director of Eicher Motors, is thus looking to replug Royal Enfield under a new chief executive officer to tide over the downturn and to prepare the 100-year-old brand for the next round of products, most of which will be in Bharat Stage VI (BS-VI) form.
On April 1, Eicher Motors, the parent company of Royal Enfield, inducted on its board Vinod Dasari - a Ashok Leyland veteran of 14 years. He was also made the CEO of Royal Enfield. Dasari’s primary responsibilities are to steer Royal Enfield operations, which Lal agreed has tapered off.
The appointment is unprecedented in the company as, till now, Lal had donned both the roles of the CEO and MD.
“So there is a new CEO and there is a shift in business in some form where the enormous growth trajectory we have gone through has tapered off a bit. So it’s an opportune time to be able to look at Royal Enfield 2.0 and how we are going to take it forward. There are lots of things we are working on,” Lal said during a conference call after announcing the fourth quarter results.
A multi-fold increase in insurance costs, tighter liquidity availability, poor buyer sentiments and even the general elections are blamed by market watchers for the continuous decline in the retail two-wheeler demand.
Royal Enfield has been experimenting with new products such as the Himalayan, but with limited success. Its best-seller Classic 350, which makes up more than half of its sales, has seen demand stagnation especially in India’s urban pockets.
“It is an excellent opportunity for him (Dasari) of course. The roll division is that he runs the company, he runs Royal Enfield entirely. My role will be to support him in various areas including in few specialized areas of product brand where currently he has less experience,” added Lal.
In November, Royal Enfield launched two 650cc-powered bikes, in India, which were also its most expensive ever. The company is content by the way the two bikes – Continental GT and Interceptor – have been received by the market so far.
“In more mature market within India the Classic is not growing anymore and that is where we will see the Continental GT and Himalayan do the heavy weight lifting to grow the brand. As we get into smaller towns the Classic is still an aspiration,” added Lal.
Starting with around 325 units Royal Enfield ramped up volumes to 2,000 units of the twins by end of April. It is presently exporting half of the production of the two bikes even as the waiting period on them in India is around four months.
Dasari said, “This is a very exciting time for the two-wheeler industry. There are so many regulatory changes being done. At the same time there are fantastic set of new products coming in at Royal Enfield so I look at this as a superb opportunity to make quite a few changes that we previously did not even have the time to do because we were just running after sales.”