Royal Enfield comes to Australia


A slice of Indian history roars down under

India’s iconic motorcycle has always had an enthusiastic fan base down under. Australia has several Royal Enfield riding groups and many more proud owners. For some time now India has been exporting the Royal Enfield to Australia and there are dealerships in several parts of the country.

In recent years, Royal Enfield has made significant strides in markets from the United States, Western Europe, Japan, and Australia. In 2010 Royal Enfield was ranked among the top 10 selling motorcycle brands in the UK in the 125-500cc category, and at the Progressive International Motorcycle Show in New York in January 2011, Popular Mechanics ranked the Royal Enfield Classic Chrome and Bullet 500 among its Top 10 picks from the show.

Royal Enfield has been making determined efforts to grow its business through exports. The company estimated that in 2012 its motorcycle exports will make up around 6% of annual sales. This drive to export to markets around the world will also ensure the Enfield a presence in more than 40 countries.

Venki Padmanabhan, CEO, Royal Enfield said, “Interest in our brand in the US, UK, Germany, Italy, France and Australia stems from the desire for some to own a piece of history. When they discover that vintage styling can be had at an attractive less-than-antique price, the interest heightens. There are many reasons now: close-by dealer and service, more reliable bikes with regular side shifting and more than 70 miles per gallon fuel efficiency.”

Roayl Enfield is also making an effort to penetrate developing country markets. “We are now figuring out the right brand and value positioning needed to appeal to the vastly untapped developing country markets that, owing to our success in India, we are well prepared to handle,” Padmanabhansaid.

Royal Enfield is one of the oldest motorcycle companies in the world, and is a division of Eicher Motors Limited. In 1994 the Eicher Group (the Indian conglomerate producing, trucks, tractors, buses, and industrial equipment) took over Enfield India and revamped the factory and its quality control measures with a view to expanding the export market. This makes sense as every bike exported rakes in a margin three times that of a unit sold in the Indian market. Royal Enfield has seen higher operating margins of over 13%coming from its exports.Royal Enfield now exports bikes to 29 countries in both developed as well as developing economies around the world. Royal Enfield also recently announced the construction of a new manufacturing plant in India to help meet unprecedented global demand for its classic motorcycles.

Its international sales in 2011 had exceeded previous year sales.In the United States, where the brand is distributed exclusively by Classic Motorworks, sales recorded a rise of more than 50%, making it one of the brand’s strongest growth markets.

Two-wheeler nation

The Indian market is playing a role in determining the role of the auto sector in the modern world

India is the world’s second largest manufacturer of motorcycles, after China. The Indian market is dominated by eight key players who produced13.8 million units in 2010-11.The industry recorded sales volumes of 13.4 million units in 2011-12, a growth of 14.0% over the previous year. The two-wheeler industry is expected to double its size every four years till 2020.

Two-wheelers dominate sales in India’s automotive market commanding over 75% marketshare; compared to this the passenger car market share is only a modest 16%. Commercialvehicles and three-wheelers between them take about 9% of the market. In the two-wheeler segment motorcycles have a staggering 80% market share.

India’s automotive industry is one of the largest and one of the fastest growing globally. The industry hasa turnover of more than $US35 billion and provides direct and indirect employmentto over 13 million people.

The major players in the Indian two-wheeler market are HeroHonda, Bajaj Auto Ltd (Bajaj Auto), TVS Motor Company Ltd (TVS) and HondaMotorcycle & Scooter India Private Limited (HMSI); these manufacturers account for over 93% of the sales inthe domestic market.

After the leading partnership, Hero Honda, in India’s two-wheeler market ended recently, Honda announced that it had plans for the Indian market that would make India the biggest global market for Honda’s two-wheeler business by 2015. The plan envisages that Honda will eventually take 30% of the Indian two-wheeler market. At present, Honda’s share of the market is 13%, but the aggressive growth strategy for the Indian market that will see India as the company’s largest overseas market, well ahead of Indonesia and Vietnam, currently Honda’s largest overseas markets.

In the business of exports, Indiastill has a long way to go 7 out of 10 two-wheelerssold in the world are still made in China. The majority of India’s two-wheeler exports are made in the motorcycle segment. Exports are made mainly to South East Asian and SAARC nations.

A cost comparison study of Indian and Chinese automotive manufacturing companies revealed that the cost of manufacturing a passenger vehicle in China is 23% less than in India, and the principal difference arises from taxes and their cascading impact in India. Higher labour productivity and lower infrastructural costs also make China more competitive. The study also indicated that issues related to design and engineering capabilities may actually inflate the cost of production in India significantly compared to China.

While many commentators in India and overseas may analyse these findings and the trends related to such facts with a view to rank one nation above the other, in terms of their industrial and manufacturing strengths, this approach can also be misleading. In light of the findings of studies that attest to cost-effectiveness of Chinese manufacturers over Indian manufacturers in a particular industry, Indian manufacturers themselves might rethink their production strategies to take advantage of China’s cost-effective manufacturing.

Take the case of Bajaj Auto, which has already launched a low-cost motorcycle in Nigeria. This bike has been manufactured in China, using a Chinese supplier base and the venture aims to dent Chinese companies’ share in the “bottom of the pyramid” segment in the motorbike market.

Industry estimates say Chinese brands account for almost two-thirds of the 21-million-unit low-priced bike segment spread across China and African countries (primarily Nigeria). Other Indian companies may also be actively exploring means to take advantage of the factors that give Chinese producers an advantage in global markets even as they try to make domestic production facilities competitive in the global market.

Manufacturing trends in today’s global village don’t conform to ideas and expectation that were current two or three decades ago when each nation’s manufacturing ability and products were seen as uniquely and solely national enterprises. India’s global two-wheeler industry is a good example of this new reality.