Rapidly growing Royal Enfield sales to stabilise in FY2017

Royal Enfield was on a dream run during FY2015-16 when it registered a consolidated year-on-year domestic growth of 53.92 percent. March 2016 stood as the month wherein the highest domestic sales in the history of this brand were recorded.

Royal Enfield sold 50,059 units in that month alone as the volumes stood similar to 12-month cumulative sales in 2010. The last financial year also recorded two months (February and March) when its motorcycle production crossed 50,000-unit mark.

Market analysts closely tracking the company say that the management is looking at producing around 60,000 units by the last few months of the ongoing fiscal year. This means that Royal Enfield’s monthly production could touch or even grow beyond the 60,000-unit mark by February-March 2017.

“The company management looks at producing close to 60,000 units around the last months of this fiscal. They say that the order book is growing, which is being addressed by the increasing production capacity. This is bringing the waiting lists of their models down. The Himalayan is now a well-received model and the order book of this new adventure tourer is very good. As against 50 percent plus YoY growth, we see a moderate growth in the range of 20-35 percent for the motorcycle unit,” revealed a market analyst who wished to remain anonymous.

This clearly underlines that the company, after having lifted its sales from 23,180 units (April 2014) to 33,118 units (April 2015) to 47,037 units (April 2016), would see modest growth as against the rapid progression in its YoY sales. The guidelines from the company management also hint at healthy expectations from the single-cylinder, 411cc Himalayan model in the coming months.

Plan to ramp up production capacity

While the company has not disclosed the production capacity of Himalayan, analysts tracking them say that Royal Enfield plans to ramp up the same to cater to the growing demand for this model, which is powered by an all-new, modular engine platform.

“Royal Enfield is looking at total production capacity of 675,000 units for FY2017. This also includes ramping up the capacity for the Himalayan model. Total planned production capacity by 2018-19 stands at 900,000 units,” added another analyst.

The Chennai-based manufacturer currently has a retail footprint of around 500 outlets, of which around 80 percent are now built on the new retail design format. “According to the company, their dealerships located in metropolitan cities are growing at 15 percent YoY,” added a market tracker who spoke to the company management recently.

In terms of domestic sales, Royal Enfield has registered 47,232 units in May 2016, which underlines a YoY growth of 36.45 percent. For the first two months of the new financial year, the company has sold more than 47,000 units in the domestic market albeit lifting the base for incoming months.

Royal Enfield’s single-cylinder, 346cc models such as Classic 350, Bullet 350 Twinspark and Bullet Electra Twinspark are the top sellers in the domestic territories.

In an official communication recently, the company had announced that it plans to invest Rs 600 crore in new product development, boosting production and R&D capacities and under other heads.

Commenting in that context, Siddhartha Lal, managing director and CEO, Eicher Motors, had said: “Royal Enfield has been investing in building strong foundations across all areas of its business. We will be investing Rs 600 crore towards product development, setting up of the two technical centres, in Leicestershire, UK and Chennai, India, enhancing our manufacturing capacity and market development activities across geographies.”