Royal Enfield aims to become a $5 billion global company: Report

Motilal Oswal said demand is back to pre-Covid levels at Royal Enfield
Midsize motorcycle maker Royal Enfield said that it aims to become a $5 billion global company and also plans a new launch every quarter, according to a report by brokerage Motilal Oswal.

The report quoted the motorcycle maker's Managing Director Vinod K Dasari after an interaction with him. However, the report did not mention the time frame in which the company plans to achieve the financial target.

The report said that the company's management has a clear focus on cruiser biking in both the domestic and export markets. It also has a strong pipeline for the next 5-7 years, with a new launch every quarter.

Royal Enfield's cruiser-style motorcycle Meteor was launched in November 2020 and the new Himalayan—meant for adventure touring— was launched in February 2021.

All of Royal Enfield's recent product—Himalayan, 650cc twins, and Meteo—launches have been a success, Dasari was quoted as saying.

The upcoming product launch of the new Classic on a brand-new platform is set to expand the firm's product portfolio and narrow the gap in product quality with respect to the 650cc twins, and also substantially expand the addressable market in India and globally.

The Meteor launch has added one more platform to the existing UCE platform (unit construction engine) of Himalayan and the twins. Earlier, Thunderbird was produced on UCE. With the increased number of operations, the company is working on de-bottlenecking its production. It has acquired land near its Vallam Plant, close to Chennai to move some operations like machining to ramp up capacity utilisation.

On digitisation, Dasari said online enquiries now constitute over 50 per cent of total enquiries as compared to 10 per cent pre-Covid and over 90 per cent of Meteor bookings are through its "make-it-yours" (MIY) platform.

He added, currently, Royal Enfield's share is just 30 per cent in the accessories market, leaving ample opportunity for growth. The launch of Meteor on its MIY platform has boosted accessories sales. With all upcoming launches on its MIY platform, the firm expects a significant increase in market share in accessories.

Speaking about exports, Dasari was quoted saying they see great opportunity in the international mid-size bike market. 

The success of the 650 twins reflects and reinforces confidence in the company's export strategy. It is expected to grow further with new launches such as Meteor and plans to launch its complete portfolio globally in due time.

Royal Enfield is targeting a 10 per cent market share in mid-size bikes in the export market and has already crossed the milestone in Korea and Australia.

Currently, the export margin is well above domestic and the management wants to keep it that way. It has started its first offshore CKD (completely knocked down) plant in Argentina in September 2020 and plans to set up three new plants in Thailand, Brazil, and Columbia.

Motilal Oswal said demand is back to pre-Covid levels at Royal Enfield and is expected to improve going forward on the back of new launches and ongoing expansion in international markets. 

After witnessing severe headwinds over the last 18 months, the brokerage expects volumes to grow from here on. The beginning of new launches could be an inflecion point for Royal Enfield as a completely new and improved platform could usher in a revival.

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