After growing at an enviable rate for over a decade, Royal Enfield started witnessing a slow down in the current financial year. Multiple factors including price hikes, high maintenance costs, and dilution of brand reputation due to reliability/quality issues have been cited by market analysts for Royal Enfield’s recent slow down.
The retro classic specialist’s sales from April 2018 to January 2019 stood at 686,773 units which is around 5% lower than the sale performance during the same period previous financial year. For reference, in 2017-18 financial year, the company posted an impressive growth of 23% and in 2016-17 financial year, the rate was even higher at 31%. The rising competition in Royal Enfield’s niche is further adding pressure.
Jawa Motorcycles entered the scene earlier this year with products that are aimed squarely at Royal Enfield’s best selling models and managed to have a very strong start. The Jawa models are booked out for the next nine months and have managed to lure a good chunk of prospective RE buyers. However, Siddhartha Lal, MD and CEO of Eicher Motors (Royal Enfield’s parent company) is not worried too much about ‘copycats’ in the industry.
The head honcho argues that RE has grown nearly twenty-fold in the last decade and has improved its profit margin from 10% to 30%. So, obviously, a lot of competitors want to take part in the lucrative medium displacement premium motorcycle segment but he is confident that it will take the competitors a lot more to take away RE’s pie. Speaking to Moneycontrol, Mr. Lal said, “There will be copycat types and there will be people doing totally different things and that is part of a competitive nature.” He also added that Royal Enfield has a strong distribution and after market network, strong service backup as well as good residual value for its models.
He also added that the company has a good product lineup and has strong future plans that would make the rivals try even harder to keep pace. He says, a new entrant will usually have a hype and excitement around its products but Royal Enfield has managed to keep steady on its course.
Royal Enfield is currently in the process of maximizing the potential of its recently launched 650 twins, as well as developing next generation of its mainstream models that will be underpinned by a brand new platform. Once the new generation models start hitting the showrooms (by 2020), RE is expected to regain most of its lost momentum.