Supply chain issues on the vendors’ side have led to rise in number of bookings pending at Royal Enfield
Royal Enfield has set the ball rolling for introduction of its next-gen models with the launch of Meteor 350 earlier this month. Despite several challenges faced in the form of other OEMs venturing into mid-segment motorcycles, Royal Enfield’s ship has remained steady as the brand holds a commanding position in this space in India.
However, it is the challenges from within rather than outside which has forced the Chennai-based bikemaker to stay on its toes. During its course of development, the latest offering from Royal Enfield, the Meteor 350, faced several delays primarily due to supply chain issues.
Current Status of pending bookings
As of last Thursday, the company’s backlog rose to 1.25 lakhs, over three times in comparison to 40,000 bookings on hold in August 2020. This comes at a time when the manufacturer has seen a recovery in demand. It is evident that the company has been facing supply chain constraints for the past few months which has led to delays in the launch timeline of its several upcoming bikes.
This backlog has also resulted in an extensive waiting period which is not good news for consumers as well as the company. In an interaction with a website, Royal Enfield CEO, Vinod Dasari claimed that it is not a generic supply chain problem.
He added that the firm has been facing certain supply issues at its vendors’ end for specific models, without going into details. Dasari further adds that the company has removed some bottlenecks with minor capital expenditure here and there, and is now looking to increase the capacity by about 5 percent this year.
Possible Way Forward For RE
According to Siddhartha Lal, MD at Eicher Motors, the parent company of Royal Enfield, the manufacturer has a higher capacity addition target but faces other bottlenecks. Prior to the Covid-19 pandemic, the bikemaker sold 60,000 motorcycles in a month on an average. This number rose to 70,000 bookings in October. Lal admits that the company could achieve 100,000 bookings a month in a few years without huge capital and a new plant.
Eicher Motors’ net profit declined by 40.13 percent YoY to Rs 343 crore for the quarter ended in September while its total revenue stood at Rs 2,134 crore, a 3 percent total degrowth. In the last few years, demand for Royal Enfield bikes has come from Tier 2 as well as Tier 3 and now it wants to emerge victorious in metros as they resume businesses in full flow from the nationwide lockdown. MoM sales volume rose to 11% to 66,891 units in October.
Royal Enfield has already received over 8,000 bookings for its latest Meteor 350. This bike directly locks horns with Honda’s latest inclusion, H’Ness CB350. The company also recently claimed that it is planning to launch 28 new bikes in the next seven years, i.e., one new bike every quarter. New Meteor 350 is offered in three variants- Fireball, Stellar and SuperNova at a starting price of Rs 1.75 lakh (ex-showroom).