Royal Enfield is easily one of the biggest brands from India and has broken records in selling its motorcycle in India and abroad. But this wasn’t the case 20 or so years back, as Royal Enfield then was sitting on blink of bankruptcy. The automotive company, has achieved it’s the best ever sales with over a million bikes that is sold worldwide. The company’s sales has also increased to about 27%.
Imagine if you brought a Royal Enfield motorcycle in 2001 you would now only have a old rugged bike. But is you invested the same amount in shares of Eicher Motors, the company that makes Enfield bikes your investment will be worth Rs 3.53 crore now. Despite operating in a niche segment, Royal Enfield remains one of the most admired motorcycle brands in India.
StartupTalky
A Brief about Royal Enfield
Royal Enfield is one of the flagship companies of the US 1.1 Billion Eicher Motors. It is an Indian motorcycle company with factories in Chennai, India. The company makes the Royal Enfield Bullet and other single cylinder motorcycles. The company was established in 1893 and is one among the oldest motorcycles companies.
It first started out as a brand of the Enfield Cycle Company, a British manufacturing firm, then went out to producing the 500 cc bullets. It is a leading manufacturing company which manufactures bullets across the globe, was looking to upgrade their IT infrastructure using industry leading solution.
| Company Name | Royal Enfield |
|---|---|
| Headquaters | Chennai |
| Founded On | 1955 (as Enfield) |
| CEO | Vinod K. Dasari |
| Parent | Eicher Motors |
| Annual Revenue | ₹8,965.00 crore (US$1.3 billion) (2018) |
It has manufacturing plants in Thiruvottiyur, Chennai, Oragadam Chennai, Sipcot Industrial plant, Chennai and Campana, Argentina. The tagline of Royal Enfield is "Jab Bullet Chale toh Duniya Raasta De" Which sums it all quite Beautifully as it is Definitely a motorcycle that enjoys an overpowering presence as people have have to make way for it.
History of Royal Enfield
The Enfield Manufacturing Company Ltd was set up in England to manufacture bicycles. The company manufactured its products under the Royal Enfield Brand. Not being satisfied with limited product line of just bicycles, Enfield Manufacturing soon decided to focus on building other types of vehicles. In the year 1899 it started manufacturing a quadricycle called the Royal Enfield Quadricycle which was powered by rear mounted engine.
In 1901 Enfield manufacturing launched its first motorcycle fitted with a 239 cc engine. As a part of global expansion strategy, Enfield started selling motorcycles in the Indian market in the year 1949. In 1955, the Indian government placed an order for eight hundred 350cc Royal Enfield motorcycle for use by its police and armed forced. The Royal Enfield motorcycles were considered an ideal choice for the Indian army for patrolling the country border.
In 1990 Royal Enfield collaborated with the Eicher group an automotive company in India and merger with it in 1994. In 2000 the company’s sales hit a low of 2000 units per month because it was suffering from problems like poor quality of its products, outdated design, change in taste and preference of customers and the entry of Japanese two wheeler manufacturers in Indian market. Despite having a cult following among its fans many prospective customers saw Royal Enfield Brand as a relic from past.
StartupTalky
The man behind the Success of Royal Enfield
The man who is responsible for the tables to turn for Royal Enfield is none other Siddartha Lal is the man who is singularly responsible for Royal Enfield. Mr. Lal has been credited with being able to make Royal Enfield a bike that is sold worldwide because dedication towards the company. It was 2004 when Lal had taken over as COO of Eicher group.
The group had a diverse spread of about 15 businesses including tractors, trucks, motorcycles, components, footwear and garments but none among them were a market leader. Lal decided to divest 13 businesses and put all money and focus behind Royal Enfield and trucks, two businesses where he believed the group had a genuine shot at leadership.
Lal decided to put his full weight behind Royal Enfield and the trucks business. Immediately after taking over as CEO, Siddhartha analyzed the strengths and weakness of Royal Enfield and started to come up with a strategy to put the brand on its path to revival.
Buying out Royal Enfield
The brand was surviving well in India until Japanese motorcycles began to enter the Indian market. This is when Mr Lal’s father who owned a tractor manufacturing company and familiar with the way parts from Royal Enfield worked, swooped in to save the brand. Enfield was one of the biggest companies in South India especially in the 60s and 70s.
Mr. Lal describes that’s, “it was a bit of a tricky moment, and firm was going bankrupt that’s when we bought it. My father got to know the people who were running the business because he was buying auto parts from Enfield for his tractor company. But we kept only one tiny portion which was the bullet factory and did not change the design because we liked the shape and the classic looks. We kept the character of the motorcycle, we kept the looks of the motorcycle, but we upgraded it to be relevant to people today.”
StartupTalky
Returning to the roots
In order to pull the brand back from the edge of bankruptcy, the team decided to return to the brand’s roots to look for solutions that could help it soar once again. It is the only automobile Indian company that dint have a Japanese collaboration. Speaking about this time, Mr Lal said, “They consulted many countries like US, Germany, Italy Austria and UK to develop an engine or motorcycle, and felt that UK understood us better.”
We found that engineering support that we could get in the Midlands was second to nowhere else in the world. In the Midlands, the team created the signature Royal Enfield Twin inceptor, which is what gave the bikes an additional boost of power that made it ideal for riding on the highway. This was a huge deal for the brand.
They had tapped into a huge consumer need that was not very vocalized. This allowed the brand to reinvent itself and become a lifestyle product that completely fit into the vibe of traveling and getting out in the world. This has made Royal Enfield quite popular with bike enthusiasts, making it the go-to bike for people who love to travel.
The increase in sales
In 2005, the company was selling only about 25,000 bikes every year and needed a manufacturing scale and a fixed cost had to be spread around 100,000 bikes. Siddhartha Lal engineered and improved Enfield bikes by riding hundreds of kilometers himself and also initiated a motorcycling culture in the team. Under Lal, as quality improved, sales grew too.
By 2010, the company was selling 50,000 bikes, but on three platforms. That was when Lal decided to build all Enfield bikes on a single platform to maximize economies of scale. The Enfield Classic, launched from this single platform, caught the fancy of customers. Sales shot up six times in half a decade from 50,000 units in CY10 to 589,293 in CY14.
At this point, the sales were just enough to help the company break even. But soon, the tech economy in India began to boom in 2010, which brought about a turning point for the brand. Now, Eicher Motors earns over Rs 8,738 crore in revenues and makes a net profit of Rs 702 crore (FY14). Royal Enfield brings in about 80% of these profits.
StartupTalky
The future of Royal Enfield
The prices of Royal Enfield were higher than that of the low powered Japanese motorcycle brands sold in India, they were cheaper than the major global brands. And in order to keep the motorcycles affordable in the price conscious Indian market, the company did not revise its prices even after the prospects of the brand started to improve in terms of sales.
| Royal Enfield Model | Price Range |
|---|---|
| Royal Enfield Classic 350 | ₹ 1,61,553 |
| Royal Enfield Bullet 350 | ₹ 1,26,982 |
| Royal Enfield Thunderbird 350X | ₹ 1,63,842 |
| Royal Enfield Himalayan | ₹ 1,91,325 |
| Royal Enfield Interceptor 650 | ₹ 2,66,059 |
The strong pricing power of the Royal Enfield brand and the improved operating margins rapidly increased the valuation of the company. In 2014, Royal Enfield recorded sales of 302,592 units. The sales for the year were higher than even the worldwide sales of Harley Davidson for the first time in the brand history. By the year 2015, Eicher Motors had become one of the most expensive automobile stocks in India.
Author: PV Vyshnavi
Source : https://startuptalky.com/royal-enfield-case-study/
Date : 2020-09-24T06:09:09.000Z