Royal Enfield gets set for new global ride

The Royal Enfield pavilion at EICMA in Milan was packed to capacity on Tuesday evening when Siddhartha Lal came on to the stage. Here was the young CEO all set to showcase his company’s new 650cc offerings at this motorcycle show in Italy, which draws the biggest global brands every year.

This was an important moment for Royal Enfield during its long journey of over 100 years, which has had its share of ups and downs. Lal has been through some of its most tumultuous times when a decades-old plant near Chennai was struggling to produce a few thousand bikes every month.

Things changed dramatically in recent times thanks to successful models such as the Classic, which have helped fuel growth to over eight lakh units annually. Two more state-of-the-art facilities have also been commissioned near Chennai. In this backdrop, Lal had every right to feel proud when he proclaimed that Royal Enfield was the fastest growing brand whose sales had jumped 16-fold over the last eight years.

The crowd went hysterical when he introduced them to the Interceptor and Continental 650 duo, legacy brands that have now been resurrected in modern avatars for the global arena. To that extent, the tagline of ‘one heart, two souls’ was absolutely appropriate. The bikes will roll out from Chennai in April 2018 but retailed first in some global markets before making their way to India and elsewhere.

“All this has been in the works for three years now,” Lal told BusinessLine just a day prior to the Milan unveiling at the company’s UK Technical Centre. “We were on a strong growth path in manufacturing and distribution. This is when we asked ourselves if we wanted to be a full-fledged player in India or go global.”

The path eventually chosen stemmed from the belief that there was a huge gap in the market globally for fun, accessible and beautiful middleweight motorcycles. While the 350cc options from Royal Enfield “hit the sweet spot” in a largely 100cc commuter bike market like India, higher engine capacities were needed for other regions such as ASEAN and Latin America.

“We have a 350 and 500 (cc), which is one family and then the 410 Himalaya that is another. Now to complement them, we have the 650 twin engines,” explained Lal. Beyond product was the strategy where the UK Tech Centre would play a big role in plotting the global route. Today, there are people in the business team working with counterparts in Colombia and ASEAN. “We are investing in a manner that is sustainable,” said Lal. “We have a very strong product strategy organisation, which understands markets around the world and is able to synthesise all that in a single product requirement document.”

This, in turn, becomes the starting point of any product like the 650cc for instance. Yet, it is not as if Royal Enfield will go all out to increase its platforms. “From one we have gone to three now and this may become four before coming back to three. But it is going to be in the order of three, four and not eight or 10,” reiterated its CEO. There will be a tight focus on the mid-size segment and even the markets will be highly strategic. The Royal Enfield legacy helps in some cases but the fact is that there are countries such as Brazil and Colombia, which have little idea of the brand.

To gain credibility here, people need to understand that this is the oldest motorcycle brand in the world, which sells nearly 70,000 bikes every month. Going online gives them more information on its growth story and customer reviews. “They then know that this is a brand that is active and progressing,” said Lal.

Yet, in this backdrop, the reality is that the Classic 350 contributes to a large share of volumes that means the other models are not firing as strongly. “Of course, we are working on our other models and brands for people to appreciate them as much as the Classic,” replied Lal. He was also quick to point out that there are other motorcycle brands, which sell even 10 times more in India, though in lower displacement categories. Yet, a breakdown of individual States within the country show that the Classic is the top selling bike brand in Kerala. In Punjab, likewise, one in four bikes sold is the Classic while it is one in five (sold) in Goa and Delhi. Lal said that the brand has a virtuous cycle going for itself where the greater visibility it has, the more people want it and the more its residual value grows.

Today, the residual value of a Classic after three years in percentage terms is double that of other competitive motorcycles. Because of all these reasons, it is a good investment for customers and Royal Enfield believes that there is still a very long way to go before it becomes overly dependent on the brand. By then, added Lal, the company would have “done a lot” of other models/brands to keep the momentum going.

Recent times have also seen manufacturers such as Bajaj Auto throw down the gauntlet in the Royal Enfield territory with products like the Dominar 400. The Pune-based company has also joined hands with Triumph of the UK to make a slew of cost-competitive models for markets around the world. How does Royal Enfield react to all this?

“It is flattering when competitors talk about us and say they want to go after our market,” said Lal. “People reading all this then think that these guys think we are special and it drives them to us actually.”

According to him, it is perfectly natural that in any market, where someone is successful, there will be copycats and people coming to say something. Yet, it is not easy to make a breakthrough because there is an entire ecosystem that is built around a brand.

“Everybody has gone after the 100cc market but have not succeeded with the original guy still there,” says the CEO. “The scooter market is the same where you can try whatever you want but cannot unseat the leader easily.”

In his view, if someone goes for a ‘me too’ strategy, it is very rarely that they can succeed in unseating the leader simply because the “original guy is not sitting on his backside and not doing anything about it”. Royal Enfield has been “working relentlessly and not leaving any stone unturned”.

Beyond the product, Lal spoke of the culture created around the brand in terms of riding communities as well as its distribution. “We are the biggest and the best premium motorcycle distribution in the country today and nobody else has this,” he said. “They all have dealers who know selling but not the kind of premium we have.” For the moment, Lal and his team have their hands full with the 650cc offerings, which will, hopefully, pave the way for a new chapter in global motorcycling.

The writer was in Milan at the invitation of Royal Enfield

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