UK sales may have been growing at pace for Royal Enfield, led by extraordinary success for the Interceptor 650 twin. But such exports will have to rise a lot faster to make up for the brand’s shrinking Indian domestic market. BDN financial editor Roger Willis reports.
During its past fiscal year to 31 March 2020, total annual sales volume sank by 15.6% to fewer than 700,000 bikes, and had already been declining through the second half of the previous fiscal year. A combination of India’s economic slowdown, increasingly fierce competition on home turf and higher costs were to blame.
Almost 70% of Royal Enfield’s domestic sales are dependent on one basic model, the Classic 350 single, which is nevertheless expensive by Indian standards at the rupee equivalent of about £1850. And the struggle to achieve compliance with tougher emissions and ABS brake requirements has pushed its price up steadily.
At the same time, the brand now has only about a quarter of the Indian over-125cc market it once dominated. As that sector has grown exponentially, new entrants have piled in with their own larger-capacity machines. Most notably, Bajaj and TVS have become a threat, respectively exploiting their technology and manufacturing links with KTM and BMW Motorrad to create 300cc-plus challengers.
All of those problems were then overwhelmed by the coronavirus pandemic. Royal Enfield completely halted operations, obeying an Indian government lockdown edict, on 23 March. It didn’t resume production until early May. Virtually all of the brand’s 1300-odd retail outlets across India were also shut. In the whole of April, the few that weren’t sold precisely 91 bikes.
Taken together with May sales, the first two months of its new fiscal year saw volume plummet by 85% to 19,204 units. Although most of the retail network was back in business by June, analysts predict a full-year domestic sales volume contraction of up to 20%. That should concentrate minds in Royal Enfield’s Chennai boardroom on overseas opportunities.