Tuesday, May 15, 2012

Royal Enfield profits climb as production soars

Royal Enfield motorcycles lined up at factory in Chennai, India.
Eicher Motors, maker of Royal Enfield motorcycles, reported a 33 per cent after tax increase in profit in the first quarter of 2012, The Economic Times of India reported.

Managing Director and CEO Siddhartha Lal called it the firm's "best ever quarterly total income" results.

The company's motorcycle business saw its sales climb by 41 per cent to 23,899 motorcycles over the year before, The Economic Times said. Royal Enfield produced and sold a record number of motorcycles in one month: more than 9,000.

Incorporated in India in 1955, Royal Enfield became a part of the Eicher Group in 1994. Royal Enfield exports its bikes to over 25 countries including the U.S., Japan, UK and Europe.

Royal Enfield USA president Kevin Mahoney put this in perspective in a post last month on the Royal Enfield USA Community Forums.

"The two-wheeler market in India has always been centered around small cc units. I am guessing that in excess of 10 million units will be sold there this year and almost all of them will be small cc. The same is true in any developing market. It is only a recent thing in India for the leisure market to even exist. It only came to be as money started to flow into India and people started to have disposable income.

"Any two-wheeler company worth its salt in the main market in India will make over 1 million units in a year. By comparison Royal Enfield will make 108,000 this year. This is up from the 25,000 we used to make year after year after year. Things have gone exceedingly well for Royal Enfield over the past several years. There are long waiting lists to buy a bike and bookings keep rising. They have enough cash to really fuel R and D and build a brand new state-of-the-art factory, which is under construction.

"The current plant has been steadily modernized. We still hand build a lot of the bike but that is by design and not default.

"We are a very small player in India and always will be. Who wants to compete in a market with huge companies selling what amounts to a commodity where margins are razor thin?

"By comparison on the world stage Triumph only made around 50,000 units last year. Harley, Triumph and most of the other brands are salivating over the Indian market and are trying to get in and get a foot hold. In the long run some of them will succeed but only when they either assemble or manufacture there...

"Through our prism  here in the U.S., Royal Enfield is a very small player, but on the global stage not so much."

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