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Eicher Motors: Riding In Top Gear
If there is one company in the Indian automotive space that has taken product differentiation to another level, it is the Gurgaon-based Eicher Motors (EML), the maker of the famous Royal Enfield bikes
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If there is one company in the Indian automotive space that has taken product differentiation to another level, it is the Gurgaon-based Eicher Motors (EML), the maker of the famous Royal Enfield bikes. The company is growing at an incredible pace that can be difficult, if not impossible for others to replicate in future. Not only is its motorcycle business recording a staggering rise, but its commercial vehicle unit VE Commercial Vehicles (VECV), which is a joint venture with Swedish auto giant Volvo, is also showing signs of healthy growth.
In 2015-16, the company posted a 43.6 per cent growth in its consolidated revenue of Rs 15,689 crore, while its net profit surged 66 per cent to Rs 1,278 crore. Continuing the growth momentum in the third quarter of FY16-17, EML reported a 61.7 per cent increase in net profit of Rs 399 crore for the quarter ended December 2016.
CEO Siddharth Lal says, “Eicher Motors has continued its strong run and reported its highest ever quarterly income from operations at Rs 2,071 crore for Q3 2016-17, a growth of 42.7 per cent over the corresponding period last year. This quarter, it also recorded its highest ever and best-in-class EBITDA at 31.4 per cent.”
The production of Royal Enfield skyrocketed from 52,000 motorcycles in 2012, to over half a million units in the year ended March 2016. The company is investing in a new greenfield manufacturing unit near Chennai that will almost double annual motorcycle capacity to 900,000 units by 2018 to meet the growing demand. The strong brand loyalty for Royal Enfield helped the company beat the demonetisation blues while most two-wheeler brands are still struggling to cope with the cash crunch. In the international markets too, Royal Enfield has become the next big brand from India to watch out for. Total exports during the eleven-month period, between April ’16 and Feb ’17, grew by a whopping 71 per cent to 13,819 units from 8,102 units a year ago.
From selling 25,000 units in 2005, to over 5 lakh units in the on-going fiscal, Royal Enfield is not only ruling the Indian roads, but minds too. During the third quarter of FY16-17, the company sold 1,73,838 units of two-wheelers compared to 1,25,690 units during the same period last fiscal, reporting a total growth of 38.3 per cent. Lal says, “Despite demonetisation, Royal Enfield has maintained its strong volume growth in the third quarter of FY16-17. Our order book continues to be strong.” During the April-Feb period, Enfield’s total sales in the domestic market stood at 5,92,558 units as against 4,48,732 units during the same period last year, up 32 per cent.
During the months of November and December 2016, the commercial vehicle industry was severely impacted due to demonetisation. But VECV’s sales are back on track. It sold 4,515 units in January 2017 compared to 3,768 units in January 2016, recording a growth of 19.8 per cent. In February, it continued its growth momentum and sold 5,499 units as against 5,032 units in February 2016, recording a growth of 9.3 per cent.
In a recent interview, Lal said, “There is a tremendous potential in the commercial vehicle (CV) business to contribute to Eicher’s growth story. In the last one decade, we have done a lot of groundwork in CVs…Entry of modern end-users and logistics providers will redefine the segment. We have been gaining tremendous market share, generally more than some of our competitors.”