Royal Enfield is bringing forward the second phase of its manufacturing capacity expansion in Tamil Nadu as motorcycle bookings grew around 21% year-on-year and dealer inventories remained at just 7-8 days, reflecting strong demand that continues to outpace production.
The Eicher Motors-owned motorcycle maker is accelerating work on the second module of its Cheyyar brownfield expansion, which will increase its annual manufacturing capacity from the current 16.5 lakh motorcycles to 18 lakh units by the fourth quarter of FY27. The company is attempting to begin production from the additional capacity as early as January 2027.
The third and final module is scheduled to become operational in the second quarter of FY28, taking Royal Enfield's combined annual manufacturing capacity to 20 lakh motorcycles ahead of the following year's festive season.
"We are now working on bringing forward the Module 2," B. Govindarajan, Managing Director of Eicher Motors and CEO of Royal Enfield, said during the company's Q2 FY27 earnings conference call on Friday.
The accelerated expansion comes as Royal Enfield struggles to fulfil growing orders despite increasing production. Govindarajan said the company entered the festive season with significantly lower dealer inventory after retail sales outpaced supplies during the first few months of the financial year.
Dealer stocks currently stand at approximately 7-8 days, including motorcycles in transit, against the company's normal operating inventory of three to four weeks. Production has increased around 15% year-on-year, but supplies have remained insufficient to meet demand.
"The retail for the season was limited only by the supplies," Govindarajan said.
To improve vehicle availability during the festive period, Royal Enfield increased direct shipments to dealers from around 1-2% of dispatches to approximately 18%. The move helped reduce delivery delays by limiting the time motorcycles spend moving through the distribution network.
The company now plans to rebuild dealer inventories over the next two months while continuing to fulfil pending orders.
According to Govindarajan, bookings have increased approximately 20-21% year-on-year during the financial year to date, with growth during the festive period slightly higher. Some motorcycle models have pending orders equivalent to approximately two months of sales, although the company did not disclose its overall order backlog.
Importantly, management said demand remained healthy even after the festive season. Enquiries and bookings have returned to their pre-festive growth trend, indicating that customer interest has not weakened sharply following Diwali.
The company expects the increased production capacity to help clear pending orders and support further growth in wholesale dispatches. It also plans to increase marketing activities once vehicle availability improves.
Sales Rise 18% During April-October FY27
Royal Enfield's manufacturing expansion comes against the backdrop of strong domestic sales growth.
The motorcycle manufacturer’s total dispatches increased 18% year-on-year to 8,42,538 units during April-October FY27. Domestic sales increased 20% year-on-year to 7,63,548 motorcycles, while exports remained largely flat at 78,990 units, compared with 78,528 units a year earlier.
In October alone, Royal Enfield recorded its highest-ever monthly dispatches of 1,33,442 motorcycles, an increase of 7% over the corresponding month last year. Its September-October dispatches totalled 2,67,400 motorcycles, supported by festive demand.
The strong domestic performance has kept pressure on the company's manufacturing operations, with management indicating that additional supplies could support higher sales in the coming months.
Manufacturing Capacity to Reach 24.5 Lakh Units by FY30
Royal Enfield's immediate expansion is part of a broader manufacturing investment programme aimed at increasing capacity across its Indian operations.
In February this year, Eicher Motors announced an investment of Rs 958 crore for the brownfield expansion at its Cheyyar facility in Tamil Nadu. The project was designed to raise overall annual capacity from approximately 14.6 lakh motorcycles to 20 lakh units in phases by FY28.
The company began FY27 with an annual capacity of approximately 15 lakh units, following improvements in productivity, automation and the removal of production bottlenecks at its existing operations.
The first module of the Cheyyar expansion became operational during the second quarter, increasing installed capacity to 16.5 lakh units. With the second module now being advanced, the company expects another 1.5 lakh units of annual capacity by Q4 FY27, followed by an additional 2 lakh units by Q2 FY28.
Beyond the Tamil Nadu expansion, Royal Enfield is also developing a greenfield manufacturing facility in Andhra Pradesh. In May, the company announced plans to invest approximately Rs 2,500 crore in a phased project at Tada, near Tirupati. Subsequently, in July, Eicher Motors' board approved Rs 1,225 crore for the first phase.
The first phase will add annual capacity of 4.5 lakh motorcycles at full utilisation and is expected to be completed during FY30, subject to market conditions. Once operational, Royal Enfield's total annual manufacturing capacity across its Indian plants will reach approximately 24.5 lakh motorcycles.
For the immediate future, management's priority remains increasing production, clearing pending orders and rebuilding dealer inventories before stepping up efforts to generate additional demand.
"We have to fill that inventory," Govindarajan said, adding that the company was sitting on substantial bookings and would focus on increasing supplies over the coming months.