Royal Enfield Motors, the maker of iconic Bullet motorcycles, has sold more bikes than Harley-Davidson for the second year in a row. Though it remains unchallenged in the domestic market, the company is working on its global ambition to lead and grow the under-served mid-sized motorcycle segment (250-750cc) in mature markets like the U.S.
Siddhartha Lal , MD & CEO of Eicher Motors, talks about the company’s global aspirations in an interview to The Hindu . Excerpts:
Royal Enfield intends to target many international markets to emerge as a mid-segment global brand. What are some of the geographies you plan to target?
Royal Enfield aims to become a global consumer brand from India. The brand has already made major strides in markets, both the developed as well as the emerging ones and we are approaching both these markets a little differently.
It is taking a controlled approach in these regions not going all over the place. Royal Enfield is building ecosystems in places where leisure motorcycling as a concept already is or is going to be very appealing. As a result, it is focusing on some of the thought leader cities in the world. In Europe, it is Madrid and Paris and in Thailand, it is Bangkok. So it’s more like establishing the brand in a city first and then making it a focal point in that country.
The developed markets or otherwise, Royal Enfield’s heritage markets like U.K. and some parts of Europe are mature enough and have a culture of leisure motorcycling. Although these are huge markets, we do not expect much volume growth yet it is important to be present there. For Royal Enfield, Australia and the U.S. are also a part of its heritage markets. We already have a subsidiary in the U.S. with strong leadership from August 2015 and we are regularly doing activities in all our heritage markets to become a key motorcycle brand in the coming years.
In developing markets, regions like South East Asia and Latin America are structurally very similar to India. They would have lot of commuters with very less options in the middle weight motorcycle category. In 2014, Royal Enfield entered Colombia and just recently, the brand came up with its first exclusive store and started retail operations in Bangkok, Thailand which is one of the largest two-wheeler markets globally. We are also present and active in Indonesia and we will soon be entering Brazil which is going to be a very crucial market for us.
We gather that the company will target under-served 250cc-750cc market globally. What makes you bullish on this category?
Globally in the two-wheeler industry, there are two types of markets which are emerging markets and the developed markets. In the emerging markets, the two-wheeler industry essentially comprises the commuter, middle weight and heavy weight motorcycles. In reality, consumers don't have middle-weight motorcycles to upgrade to in most of these markets because the offerings are really bland and not fun or evocative. Then there are heavy weights that are just not built for bumpy and bad roads which are common in these markets. Even if we do not consider the costs incurred on the insurance and the maintenance, that are absolutely awful for all those big motorcycles, a huge cruiser on tight Indian or Indonesian roads is impractical from an ergonomics point of view.
In developed markets such as Europe, America, or Australia, things have gone out of hand with extremely heavier and super-fast motorcycles. Consumers today are realising they don't need super heavy, super expensive, super big, super-fast motorcycles. There are a growing number of riders who prefer something they can have fun with, that doesn’t cost a bomb. In the developing and the developed markets, consumers are converging to the middle segment in the coming years. Royal Enfield sees a lot of potential here for evocative, un-intimidating, fun-to-ride motorcycles.
Some of the global players like BMW have also started targeting sub-700cc markets. What will be your advantages in countering that competition?
Royal Enfield is aware that this segment will see more players and it has plans to address the market. However, Royal Enfield does not do direct benchmarking and specification based on competition. Royal Enfield is a unique brand and it believes in being disruptive. This has helped in gaining around 95 per cent market share in India and salience for its products and brand. Royal Enfield’s existing products continue to have a very strong pull and recently Royal Enfield introduced its latest product - Himalayan, which we believe will further strengthen our offering. On the distribution side or market development side, all these products are going to contribute to grow the size of the middle weight leisure motorcycle segment. We are well-placed while others are trying to figure out how to take a little bite out of the middle-weight segment.
How has your shift to U.K. helped in spearheading the company’s global growth?
As you know, a lot of work has been happening at Royal Enfield on product strategy front. Much of it is taking place at our U.K. Tech centre. We have an excellent technical capability there and we want to closely work with the teams.
While the team in India is busy with everyday business, I am able to focus more on product development.
Moreover the reason behind my shift to U.K. was to focus more on the international markets and being in U.K., I am closer to the European and the American markets. This helps me understand consumer insights in the mature markets.
Another factor is the exposure to new ideas when you work with new teams especially in another country. From the market development perspective, U.K. is right in the thick of where we want to be.
