Eicher Motors reported robust June Quarter 2023 results. The stock price was up 3% intraday after Q1FY24 results were announced. But even with a 3% jump, Eicher Motors stock price could not recoup its 7% fall suffered since July 3, 2023. Eicher Motors reported consolidated revenue growth of Rs 3,986 crore, highest ever quarterly revenues, a rise of 17% YoY in Q1FY24.
The manufacturer of iconic Royal Enfield motorcycles sold 2.27 lakh motorcycles in Q1FY24, a rise of 21% YoY in the same period previous year. Operating margins came in at 25.6% in June Quarter 2023, expanding 115 basis points YoY. Operating margin expansion was mainly due to price hikes and saving in sourcing costs, said Vidhya Srinivasan, Group CFO, Eicher Motors.
Profit After Tax (PAT) was at Rs 918 crore, up 50.4% YoY compared to Rs 611 crore corresponding quarter previous year. Eicher Motors delivered its best ever June Quarter performance and also its fourth consecutive quarter of highest ever revenue and profit after tax (PAT). But even with such strong financial performance, investors are concerned about Royal Enfield’s future growth prospects amidst global competition.
Harley Davidson Is Back Again
After shutting its operations in 2020, Harley Davidson is back in India and this time through a tie up with Hero MotoCorp. Hero MotoCorp and Harley Davidson are partnering to break into the niche midweight segment (above 250-750 cc) where Eicher Motors owns nearly 90%. Hero MotoCorp-Harley Davidson announced their X440 motorcycle priced at Rs 2.29 lakh on July 3, 2023. At this price, X440 will give competition to Royal Enfield’s Classic 350 and Himalayan 400 priced at Rs 1.9 lakh and Rs 2.15 lakh respectively. A knee jerk reaction by investors, 3% dip in share price on July 3, 2023. But is this the first time that Royal Enfield is facing competition. Certainly not. Dominar 400, Honda CB300R, Kawasaki W800, Husqvarna Vitpilen 401 have all been here for quite some time now. But Harley Davidson, the iconic leisure biker is back again and this time with an affordable pricing strategy for midweight-segment motorcycle buyers. Will it succeed to break into Royal Enfield’s niche landscape and strike luck for the second time?
Royal Enfield’s Market Share Not On A Platter
Royal Enfield has been able to fend off all kinds of competition both from domestic and global players. Speaking on competition from foreign competitors, Sidhartha Lal, Managing Director & CEO, Eicher Motors said, “We are not focused on competition because we are focused on customers”. This is how Eicher Motors, the company that defines the midweight motorcycle segment created its monopoly in leisure biking in India. Over the past 15 years, the company has grown its motorcycle volumes from 50,000 units to one million. And the company is not going to give its market share on a platter to its new competition, said Lal. Speaking on the Royal Enfield brand, Lal said, “We’ve created a really tremendous brand. And it’s not just the name Royal Enfield. It’s more than just up there in the air.” He further added, “ When you ask young people, what is the premium motorcycle in India. It’s a Royal Enfield.” But will the company tinker with its pricing strategy to compete with Harley-Hero MotoCorp motorcycles. Whether its operating margins will be impacted, it would be a key monitorable in the coming quarters? Harley Davidson, leisure biking icon is also not in the best of its health. Harley Davidson’s retail sales fell 7% YoY in CY2022. The company lost its leadership to Honda in North America and reported lower sales growth in all its major markets in CY22. A successful foray into world’s second largest motorcycle market would aid sales volume growth in the long run. But it would be interesting and beneficial for Indian motorcycle lovers as premium companies restrain their prices to lure growth.
Royal Enfield Bullet 350 – The Indian Baazigar
Royal Enfield has nearly 11-12 products lined up in the near future. Speaking on new product launches B. Govindarajan, CEO Royal Enfiled said, “We have a slew of new products ready, and are going to be launched in a particular time interval. We will space it. We won’t be in a hurry to do anything just to answer something.” But Harley Davidson’s X440 with its affordable pricing has definitely increased competitive heat within the middleweight motorcycle segment. Royal Enfield’s Bullet 350 was launched on September 1, 2023 at a price of Rs 1.73 lakh (ex-showroom). Bullet 350 is priced between Hunter (Rs 1.49 lakh ex-showroom price).and Classic 350 (1.93 lakh ex-showroom). And perhaps for the first time in the history of Royal Enfield, the company released a TV commercial on the same day of the launch. Royal Enfield always believed in product promotion through word of mouth rather than the traditional advertising campaigns. But intense competition has now made the company more nimble and aggressive on this front too. The recent Bullet 350 baazigar television commercial has proved that even elephants can dance. This is a complete diversion from its original promotional strategy and indicates Eicher Motor’s intent to maintain its leadership in the middleweight segment by shoring up volumes. The Indian baazigar is ready to take on the new global competition head on.
Royal Enfield has launched the all-new 2023 Bullet 350 at a starting price of Rs 1.73 lakh. The bike is offered in three variants, namely Military, Standard, and Black Gold. The Bullet 350 Military has been priced at Rs 1.74 lakh. The Standard has been priced at Rs 1.97 lakh, and lastly, the Black Gold variant has been priced at Rs 2.16 lakh
