Swaraj Baggonkar Moneycontrol News
For three consecutive months now, India-wide sales of Royal Enfield have seen a drop compared to a year earlier, marking its slowest growth pace in more than 12 years. The company has been hit by a combination of factors including brand fatigue, increased competition and a series of price hikes.
A critical reason, according to market watchers, for the fall has been the entry (and return) of Jawa brand, which competes in the same segment as Royal Enfield. Owned by conglomerate Mahindra & Mahindra (M&M) the Jawas are priced in the same price band as the Royal Enfield range of Rs 1.5-2 lakh.
While Eicher Motors-controlled Royal Enfield sales growth in November, December and January slid into the red, M&M declared a total stock out for nine months for the Jawas, thanks to the unprecedented bookings turnout. Since bikes of both the competing brands belong to the same segment, Jawa is believed to have poached customers of Royal Enfield.
Siddhartha Lal, the Managing Director and CEO, Eicher Motors, admitted that competition for Royal Enfield is rising and will continue to rise in the future but it 'will take a lot more to take away our pie'.
"Royal Enfield is an entrenched leader which has a strong distribution and aftermarket network with strong service backup and residual value. New entrants, of course, there will be many and more shall be coming up. There will be copycat types and there will be people doing totally different things and that is part of a competitive nature. We have a very good product line and very strong plans. We are on a great wicket, it's the others who have to try hard to even take a nibble out of us," Lal said.
Domestic sales growth of Royal Enfield slowed down 5 percent (down from high double-digit growths in past several years) to 686,773 units during the April-January period. In the previous financial year, Royal Enfield’s growth stood at 23 percent to 801,229 units while in 2016-17 it was 31 percent to 651,107 units.
"In the last 10 years, we have had an excellent growth of nearly 20X and margin expansion to 30 percent from 10 percent. And that is attracting lots of people to enter our market and that includes some of the biggest players. Initially, there is always hype, because there is a new product and there is always the noise and excitement about it. But we have managed to keep steady and keep our course. We take deep cognizance of competitors coming in and we have our own ways of managing that," Lal added.
With 878 dealers, Royal Enfield has the largest network of dealerships in India for premium bikes and the brand is banking on this to keep the retail push. The brand saw an addition of 20 dealerships during the October-December quarter. Eicher Motors hopes to end the year at 900 dealerships by end of the current financial year.
Also Read: Waiting period for Royal Enfield grows to 6 months
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