Royal Enfield set to scale a new peak of 8.5 lakh in FY23; targets one million output in FY24

Royal Enfield, the premium motorcycle maker, is well on its way to post its highest ever output of 8.5 lakh units in FY23, on the back of improved supply chain and increased demand for its new models. The exports for the year are also set to breach one lakh units for the first time and account for 12 percent of its total output.

If the company achieves its target, it will be the first year of positive growth in the last four years for the maker of Meteor and Interceptor. 

Autocar Professional has learnt that the company has set itself a target to breach one million units and if the recovery continues, then it may even look to produce about 1.2 million units as per optimistic estimates in the coming financial year.

Already, in the April to September period of FY23, the output was higher by 86 percent to a little over four lakh units, in the second half it is likely to produce about 4.5 lakh units, with output nearing one lakh vehicles per month by the end of Q4FY23.

New Beginnings

Its new entry bike Hunter has got off to a very good start and the company has already retailed about 55,000 units since the launch in August and the company claims to have faced very little cannibalisation from its existing portfolio.

The launch of Hunter has brought in new incremental buyers for Royal Enfield, with the share of first-time buyers for the brand approaching a close to fifth of its overall sales. For Hunter alone, 26 percent of the buyers are first-time buyers.

The new entry-level bike has resulted in the average selling price falling marginally. However, the launch of the 650 cc Meteor will help Royal Enfield recoup its lost margin, believe industry analysts.

The softening of commodity prices and improving operating leverage along with price hikes will help Royal Enfield to improve its margins in the following quarters.

Along with a strong traction for premium bikes in the market, the company's attempt to broad base the supply chain on semiconductor front appears to be helping. In a recent media call, the management said that the supplies have been better than the previous quarters and it is nearing normalcy.

B Govindarajan, CEO, Royal Enfield, said, “We had an issue with availability of semiconductors, availability of steel, etc. which are not in the headwind as of now; it is getting sorted out. We were all assuming the super commodity pressure will continue for a longer period of time, which is now not there. In between, we had our semiconductors and all those things, we were buying it from the resellers as the price was higher and the logistics cost was also higher. All those things are behind us now by and large. Supply chain stability is coming gradually and we are also ramping up.”

On the demand environment, Govindrajan said, during the festive season, the company recorded more than 30 percent market share in the more than 125 cc segment. The company is producing about 3,100 to 3,200 units per day. “Post pandemic, people are going out for weekend rides. There are frequent enquiries on Meteor 650, as to when will the company start the booking for Super Meteor 650, highlighting that demand is picking up,” he said.

At the earnings call, the company declined to give any forward-looking guidance on the production and sales plans.

An email sent to Royal Enfield did not elicit any response at the time of publishing.

The revival of Royal Enfield’s volumes and its sister company Volvo Eicher Commercial Vehicle has been rewarded by the street, with Eicher Motors’ share price increasing from Rs 2,700 to Rs 3,500 per share in the last six months.