Royal Enfield rides on festive demand, inventory at stock-out level in West and North India

by Shahkar Abidi 04 Nov 2019

While sales of bikes up to 350cc are down 5% in October, those above 350cc, including the 650 twins are up 160% (7,707 units). This segment also saw 58% YoY growth in April-October with 53,220 units.

Festival-led demand in October has led to a spike in sales for some automakers and among two-wheeler OEMs, Royal Enfield has benefited substantially to the extent that its inventory level is down to about three weeks. In fact, the situation has resulted in a stock-out situation in many key markets in West and North India.

This latest update comes from a report released by Centrum Research. Interestingly, apex dealer body FADA has for long been urging OEMs to reduce their piled-up inventories, which had reached alarming proportions in the past 6-8 months.

“Dealer checks suggest inventory stock-out in key markets of West and North India,” reveals the Centrum Research report. A query to Royal Enfield as to how it plans to address the stock-out situation in key markets remained unanswered till the time of this report. 

Monthly despatch data released by Royal Enfield on Friday (November 1) indicates a total of 71,964 units in October 2019, a YoY growth of 2 percent (October 2018: 70,451 units) and a MoM growth of 31 percent (September 2019: 54,858 units). The company further reported that sales of the motorcycles up to 350cc have declined by 5 percent but sales of bikes above 350cc, which includes the 650 twins -- Interceptor 650 and the Continental GT 650 -- have registered a YoY growth of 160 percent with 7,707 units. This segment also saw a 58 percent YoY growth in the April to October 2019 period with 53,220 units sold. The 650 twins’ Diwali sales would be just what the doctor ordered for Royal Enfield, which has found the going somewhat tough in the face of growing competition.

According to FADA's advisory note in mid-October, "Two-wheeler inventory, despite factoring in the festive season demand, continues to be very high and is a very big cause of concern. FADA urges all OEMs to be judicious in their assessment of the retail conditions and accordingly regulate their wholesale billing as the demand situation continues to be in a dynamic state. If retail growth is projected beyond a realistic situation, it can once again lead to a high inventory situation in this tricky phase of BS-VI transition which is just 5 months away."

Royal Enfield's rise and fall in market share
Royal Enfield, which has been the market leader in the premium bike segment, has seen its market share reduce in the past 18 months. In FY2015, the company sold 324,055 units and had a market share of 3.02% percent; this rose to 4.66% and 498,791 units in FY2016. Things got better in FY2017 and FY2018 with sales increasing to 651,107 and 801,229 units with market shares of 5.87% and 6.35% respectively. However, FY2019 saw flat sales of 805,273 units (0.50%) with market share falling to 5.92%. In the six months of FY2020 (April- September 2019), Royal Enfield sold 327,222 units, down a substantial 23% (April-September 2018: 424,805) with market share down to 5.24 percent. 

The company's slowing sales are attributed to rising competition in the midsized bike segment as well as the overall tepid market and consumer sentiment. But with one of the world's largest motorcycle fairs, EICMA 2019, opening on November 5 in Milan, Royal Enfield could have a surprise package or two for aficionados. Stay tuned.