Royal Enfield posted a 14% sales drop in December 2018, its sharpest slowdown since June 2011
Royal Enfield's harmonious relationship with India's leisure biking segment is witnessing the seven-year itch. The Eicher Motors-controlled brand has clocked its worst monthly sales performance since June 2011. And the reason is clear — the comeback of Jawa motorcycles.
Royal Enfield reported a drop of 14 percent in December 2018 in domestic sales, the sharpest drop since June 2011 when the leisure bike brand posted 31 percent drop in domestic volumes. Sales for Royal Enfield stood at 56,026 units in December against 65,367 units clocked in the year-ago period.
After an unprecedented surge in bookings for each of the two Jawa models unveiled in mid-November, Mahindra & Mahindra (M&M)-controlled Classic Legends halted the booking process on midnight of December 25.
M&M said that bookings had to be halted as there is a stock-out situation at its factory in Madhya Pradesh. Deliveries of Jawa models from the recently closed lot of bookings will commence in March and will continue till September. This was the first in more than eight years that bookings of a model had to be halted due to demand surge.
Both Jawa and Royal Enfield models use the same retro styling-DNA inspired by motorcycles sold in the 1960s and 1970s. While the Jawas are powered by a single cylinder 300cc engine that produces peak power of 27hp the Royal Enfield Classic is powered by a 350cc single cylinder engine generating 20hp of peak power.
The surge in demand for the Jawas has comes despite their higher prices tags compared to the Classic 350. While the Royal Enfield Classic 350 is priced at Rs 1.4 lakh the Jawa Forty-Two is priced Rs 1.55 lakh (both prices ex-showroom, Delhi).
For Royal Enfield, FY19 has been low-key. The brand clocked a growth of just six percent in domestic sales during the April-December period as against 21 percent growth clocked in the same period last year.
Hit by some fatigue in demand for its traditional models such as the Classic 350 (its largest-selling model) and underperformance of new models such as the Himalayan and Continental GT 500, hit Royal Enfield hard this year even though no company has launched any competing model in the same category and price band.
From a high, industry beating double digit growths in earlier years, Royal Enfield’s growth at nine percent during April-November period was below that of the industry which grew by 11 percent during the same year.
Royal Enfield launched two bikes in November, Interceptor and Continental GT, both of which are priced above Rs 2.5 lakh. Senior executives of Eicher Motors say the company is not expecting ‘huge numbers’ from the two models given their steeper price tags.The brand lost about 30,000 units of production due to a tool-down strike occurred in September and October at its factory in near Chennai. By mid-November the strike was withdrawn and the company restored production to optimum level. There has been no production issue since then confirmed a company official.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.