Comprehensive Pack

Auto

1
• Two-Wheelers

• Overview :3

• Motorcycles : 10

• Scooters and Mopeds : 16

• Exports : 21

• Realizations : 26

• Cars & Uvs : 36

• Auto-Dealerships : 51

• Used Vehicles : 67

•Company Analysis : 78
2
 2 Wheelers: Overview

3
 Two wheeler industry had 3 continuous bad years in FY 20 and FY 21.

TWO-WHEELER GROWTH TRENDS

Source: SIAM
4
 The share of motor- cycles sales has dropped from 77% in 2011 to 66%
in 2019. In contrast, the share of scooters has increased from 17% to
30% in the same period

SEGMENTAL MIX CHANGE (2009-2019)

Source: SIAM
5
 FACTORS INFLUENCING GROWTH

Why Scooters are growing fast?

• Improved road network in Tier 2 and Tier 3 cities and lack of public
transport
•Reducing mileage gap between motorcycles and scooters
•Gender-neutral positioning
•Launch of new models
•Steady expansion in players' dealership network
•Capacity expansion by leading players
• HMSI’s focus on Scooters

6
 Electric Two Wheelers is expected to constitute 16% of the 2-wheeler
industry by 2025 of which 90% will be e-scooters and 10% will be e-
motorcycles.

SEGMENTAL MIX CHANGE (2019-2025)

Source: Crisil Research

7
OVERALL MARKET SHARE

Player Market Share

2010-11 2020-21
Hero 44.8% 36%

HMSI 13.2% 26%

Bajaj Auto 20.5% 12%

TVS 13% 13%

Royal Enfield 1% 4%
Others 7% 9%

Source: SIAM, CRISIL Research

8
 Motor-Cycle review

9
 HMSI has been gaining market share at the expense of Hero Motocorp
and Bajaj.

MOTORCYCLES : DOMESTIC MARKET SHARE

Source: SIAM, Crisil Research

10
MOTORCYCLE SUBSEGMENTS
•Motorcycles are classified as

economy, executive and premium,

depending on their launch price

and engine capacity.

• Share of premium and economy

sub-segments are on the rise while

that of Executive sub-segment is on

the decline.
Source: SIAM, CMIE
11
 Hero lead this segment with 76% market share.

MOTORCYCLES SUB-SEGMENTS • Hero continues to dominate

ECONOMY the economy sub-segment
with its CD Dawn Deluxe
range of models.
• Bajaj Auto occupy the second
position post the upgrade of
CT-100 and Platina.
• In the absence of new models,
TVS Motors, lost its market
share in the segment from
20.2% in fiscal 2013 to 6% in
Source: SIAM, Crisil Research fiscal 2021.
12
 HMSI has become the market leader in the Executive sub-segment

MOTORCYCLES SUB-SEGMENTS
EXECUTIVE
•HMSI has substantially increased
the share and became the market
leader through primarily due to
Honda Shine.
•Hero is the 2nd major player with 2
top-selling models – Splendour and
Passion Plus
•Bajaj has increased the share
through the launch of Pulsar series

Source: SIAM, Crisil Research

13
 Royal Enfield, TVS and HMSI dominate the premium segment.

MOTORCYCLES SUB-SEGMENTS Royal Enfield retained the

PREMIUM leadership position, with 36%
market share in fiscal 2021.
TVS' market share stood at
second position with market share
of 21%, mainly on account of
strong demand for Apache 160R
and the recently launched RR310.
Market share of HMSI increased
exponentially within the premium
segment owing to launch of
Unicorn PRM, Hornet 2.0 and
Source: SIAM, Crisil Research H’Ness.
14
 Scooters and Mopeds

15
 HMSI is way ahead of others in the scooters segment while TVS has
been gaining market share since FY 19

Scooters Market Share • HMSI is the market leader

with Activa with a huge lead
over others.
• But Honda Grazia failed to
make a big impact
•TVS gained market share with
the success of Jupiter and Ntorq
125.
•Hero is the third player with
models like Maestro, Pleasure
and Duet.
.

Source: SIAM, CRISIL Research

16
 EXPORTS

17
 Exports has been picking up since Q3 of FY 21

EXPORTS – VOLUMES AND GROWTH

Source: SIAM, CRISIL Research

18
 Africa and Asia contribute to 56% of 2 wheeler exports.

EXPORTS DESTINATION

Source: DGFT, Crisil Research

19
 Why Asian exports reduced?

 Two wheeler exports to Asia increased by 76% on year during April-November

2021 over very low base of FY21 as lockdowns were imposed from April 2020.
Within Asia, Nepal is an important export destination.

 Similarly, the other key export nation which drives Asia exports, namely
Bangladesh, witnessed growth in April-November of Fiscal 2022.

 Sri Lanka, which accounted for ~8% of Indian two-wheeler exports in fiscal
2020, banned vehicle imports in early fiscal 2021 due to pressure on the
government's foreign debt repayment.

20
 Motorcycles constitute more than 90% of 2-wheeler exports and Bajaj
holds dominant share.

EXPORTS : PRODUCT MIX AND MARKET SHARE

Exports: Product Mix Exports: Player’s Market share

Source: SIAM, Crisil Research

21
 Hero Vs Bajaj Vs Eicher

22
 Despite having lower market share, Bajaj is the highest profit
making 2-wheeler company due to it’s premium bikes and exports.

HERO HONDA VS BAJAJ AUTO : FINANCIAL COMPARISON

FY 2022 Bajaj Hero Eicher

Domestic Market 12% 36% 4%

Share
Net Sales (Rs. crs) 33,147 29,245 10, 297

Profit after Tax 5,018 2,473 1,616

(Rs. crs)
Net Profit Margin 15.1% 8.5% 15.6%

Exports to Sales 77% 3% 16%

Volumes
[Link] (Rs. cr) as 1,16,000 55,360 84,480
on 8th August 2022
23
Source: Company Reports, Analyst Reports
 COSTS AND MARGINS

24
 Raw material costs constitute 70 to 75% of the total costs.

COST BREAK-UP

Type of Costs Percentage of Total

Revenues
Raw Material Costs 70 to 75%
Selling and Distribution 6 to 7%
Costs
Employee Costs 4.5 to 5%%
R & D Costs 2 to 3%

25
Source: Company Reports
 Steel , Aluminium, Plastics and Rubber constitute the bulk of the
Raw material for motorcycle manufacturers.

RAW MATERIAL COMPOSITION

26
Source: Industry
 Capacity Utilization at all time low in 2021.

CAPACITY UTILIZATION TRENDS

Capacities and utilization rates of
players (fiscal 2021)
Capacity utilization in two-wheelers
industry at an all time low in fiscal 2021

Source: Crisil Research, Company Reports

27
 Operating margins contracted due to lower capacity utilization in
fiscal 2022

MARGINS

Source: CRISIL Research

28
 Cars & UVs

29
 Industry Overview

30
 For the first time in a decade, car & UV segment suffered 2
consecutive years of decline in volumes

OVERALL VOLUME GROWTH

Source: SIAM, CRISIL Research

31
 Share of small cars have reduced while that of UVs have improved
significantly.

SEGMENTAL MIX

Source: Crisil Research, SIAM

32
 Maruti holds the leadership position in small cars and vans.

MARKET SHARES

Source: Crisil Research, SIAM

33
 SEGMENTAL ANALYSIS
– SMALL CARS

34
SMALL CARS
• The small cars segment comprised

45% of the domestic PV industry .

• The top two players- Maruti

Suzuki and Hyundai Motors,

accounted for 80% of the segment's

sales during this period.

Source: SIAM
35
 SEGMENTAL ANALYSIS
– SEDANS

36
 Market share in the sedan segment is very volatile with players
gaining and losing the market share significantly over short period of
time.
SEDAN : MARKET SHARE

Source: SIAM
37
SEDANS: COMPETITION
 Maruti’s share in the large cars segment started declining after implementation of the
Goods and Services Tax (GST) due to a higher cess on hybrid vehicles compared with the
earlier tax rates.
 The company’s only model in this segment – Ciaz – is available with a hybrid variant. The
market share of Ciaz declined to ~18% in the first three quarters of fiscal 2022 from ~28% in
fiscal 2018 due to stiff competition from Hyundai’s Verna, Honda's City and a range of
large cars of other manufacturers.
 Sales of Honda City in fiscal 2018 helped the company partially regain the market share
lost in fiscal 2016, but City sales lost momentum, with the market share of reaching ~22%
in fiscal 2020.
 Honda has regained significant market share, reaching ~44% with City gaining the numero
uno spot in the first three quarters of this fiscal.
 Hyundai increased its market share to ~26% in the first three quartes of fiscal 2022 from
~18% in fiscal 2018 in the large cars segment due to superior sales of Verna over its rivals
 The share of Toyota declined to ~1% in the first half of this fiscal from ~13% in fiscal 2018
due to decline in sales of Yaris.
 Additionally, discontinuation of Etios sedan and Corolla from begining of 2020 has also led
to38decline in its market share.
 Utility Vehicles

39
 Mahindra’s share has fallen drastically in the last decade while Maruti
and Hyundai has gained considerably.

UV : MARKET SHARE

Source: SIAM, Crisil Research

40
 Why M& M lost it’s share?

RISE OF COMPACT UVs

 UV segment witnessed a major shift in customer preference with the launch of

compact UVs such as Duster, Ford EcoSport, Maruti's Brezza, Hyundai's Creta,

Mahindra's XUV, Tata's Nexon etc

 Increase in diesel prices, following deregulation of the fuel, has aggravated

contraction in M&M's share as most of its models are powered by diesel power

trains, while most compact UVs are available with a petrol option.

 MG Hector gained ~10% market share in other UVs segment after its launch in

fiscal 2020 and reached ~16% market share in the nine months of fiscal 2021.
41
 Why M& M lost it’s share?

RISE OF COMPACT UVs  The changing profile of UVs has also

altered competitive dynamics.
 M&M, one of the largest players in the UV
segment, has seen its share steadily
contract since fiscal 2013, owing to stiff
competition from compact UV models
launched by Ford and Renault in fiscal
2013, as well as launches by Maruti, Fiat,
Tata Motors and Hyundai.
 The increase in diesel prices following
deregulation of fuels has aggravated the
contraction in M&M's share as all the
company’s models are powered by diesel
power trains, while most compact UVs are
available with a petrol option.

42
Source: SIAM, Crisil Research
 Electric Vehicles

43
 Electric passenger vehicles to contribute ~4% of domestic sales by
FY24 led by higher adoption within commercial use segment.

ELECTRIC VEHICLES

• Battery prices are falling at the rate of 20% annually over the last 10 years and

expected to fall at the rate of 10% over the next 5 years.

• This will increase the adoption of EVs.

• In India, the adoption of EVs in cabs is expected to be faster than the personal

vars.

• As of now, through FAME Indian government provides subsidies to cab

owners and not to car buyers for personal use.

44
 AUTO DEALERSHIPS

45
KEY FACTORS

• Number of Dealers

• Sales per dealer

• Workshop vs Showroom revenues

• Dealer profitability

• New initiatives

46
 Though TVS has the largest number of dealers, sales volume per
dealer is highest for Hero Motocorp.

2 WHEELERS
COMPANY-WISE NUMBER OF SALES VOLUME PER DEALER
DEALERS

47
 While Maruti has the largest number of dealers, Hyundai has the
highest sales volume per dealer.

CARS
COMPANY-WISE NUMBER OF SALES VOLUME PER DEALER
DEALERS

48
 While Tata Motors has the largest number of dealers Mahindra has
the highest sales volume per dealer.

COMMERCIAL VEHICLES
COMPANY-WISE NUMBER OF SALES VOLUME PER DEALER
DEALERS

49
 Workshop revenues constitute a critical portion of cars and 2-
wheeler dealerships.

AUTO-DEALERSHIPS : KEY NUMBERS

50
 ROCE is higher for the dealer of old OEMs like Maruti and
Hyundai.

ROCE: CAR DEALERSHIPS

51
 Profitability of dealers varies across companies.

DEALER PROFITABILITY: PASSENGER VEHICLES

52
 RECENT STRATEGIES BY DEALERS

• Quick-start modular sales points

• Widening the rural reach

•OEM-run driving schools an add-on service for customers

• CV dealers setting up service stations

• OEMs open to multi-brand service stations

•Used Vehicle business as an alternate revenue stream

53
 RECENT STRATEGIES

Quick-start modular sales points

•Such dealerships are mobile showrooms that can be deployed at any location
in about six weeks.
•This is a low-cost approach that enables dealers to reach remote locations and
also makes it flexible for them to relocate.
•One such OEM that set up mobile showrooms is BMW.
•The company opened its first mobile showroom in 2012 in Karnal that was
managed by one of its dealers in Chandigarh.

54
 RECENT STRATEGIES

Newer locations to increase brand recall and drive sales

•Dealers set up stalls in malls, supermarkets, outside bank premises, near

corporate offices of companies, airports, during festival events, carry out a road

show, customised events, etc.

•This helps car dealers to achieve a brand recognition by displaying their

products and also helps in gathering useful information on prospective

customers, feedback on new products etc.

55
 RECENT STRATEGIES

WIDENING THE RURAL REACH

•Auto dealers, especially two-wheeler and small car dealers are expanding in
tier-3 and smaller towns by opening only sales touch-points in these areas.
•This helps them expand in some of these low-turnover areas by keeping the
cost of opening a dealership low.
•Instead of increasing the number of dealerships, OEMs often prefer that their
existing dealers expand into these smaller markets through standalone sales
points.

56
 RECENT STRATEGIES

Used Vehicle (especially car) business an alternate revenue stream

•The used car business presents a huge opportunity for automotive dealers.
• Presence in the used car business helps shield risks to margins, especially
when new cars sales may be affected.
•In case of used cars, dealers also have a higher bargaining power - in
determining the price at which the used car is purchased.
• For OEMs, the used car business is mainly a sales pitch - it helps them offer
exchange schemes to consumers at the point of purchase (dealer), while at the
same time boosting sales of new models.
•Some OEMs present in the used car business are Maruti True Value, Honda
Auto Terrace, Hyundai Advantage, Tata Motors Assured and Mahindra First
Choice.
57
 RECENT STRATEGIES

OEM-run driving schools an add-on service for customers

•Maruti Suzuki India Ltd (MSIL) is among the first automakers to launch its
own driving school.
• While MSIL has granted franchise rights to select dealers across the country, to
run such driving schools, all systems, processes and course content are
monitored by MSIL.
•Through this additional service, dealers can help draw customers and OEMs
can create a brand recall. MSIL currently operates 332 driving schools across 172
cities.
• Other players including Tata Motors, Mahindra & Mahindra; along with
luxury carmaker Mercedes Benz have set up driving schools.

58
CV dealers setting up service stations
•Unlike car and two-wheeler dealers, commercial vehicle (CV) dealers typically
have sales touch-points only and the vehicles are usually serviced by local
garages.
•However, many large CV dealers are now looking to set up service stations as
well.
•As more international CV manufacturers enter the Indian market and more
complex models being manufactured, it makes business sense for CV dealers to
set up service stations.

59
OEMs open to multi-brand service stations

•Over the past few years, OEMs as well as standalone companies have been
setting up multi-brand service station chains in India.
•Prominent names in this space are Carz, Carnation Auto, Mahindra First Choice
Services and TVS Automobile Solutions.
•Eyeing the huge market that India is, foreign multi-brand dealerships are also
looking to set up shop in the country.
•Meineke Car Care Center, Midas Auto Service and AutoZone of the United
States, and Autodistribution International of France are some global service and
auto parts chains that are looking to enter India through an alliance with an
Indian player.

60
 USED VEHICLES : CARS

61
 Used car market in India is twice the size of the new car market by
sales volumes

RATIO OF USED CAR SALES TO NEW CAR SALES

62
 Used car market is expected to reach 6 million units by 2018-19

USED CAR MARKET GROWTH

63
 USED CARS : DEMAND DRIVERS

SHRINKING HOLDING PERIOD

OVERALL AVERAGE HOLDING AVERAGE HOLDING PERIOD BY
PERIOD (IN YEARS) SEGMENT(IN YEARS)

Year Average Holding

Period

2003-4 7

20010-11 6

2016-17 4.5

64
USED CARS BUSINESS MODELS
•Park-and-sell (pure-intermediaries):
Dealers allow sellers to park their used cars at their premises for potential
buyers to inspect and to make enquiries.
Dealers receive commissions from one or both parties.
•Buy-and-sell:
Dealers buy used cars, display them in their showroom/parking area and
eventually sell them at a margin, besides facilitating title transfers from
buyer to seller.
•Buy, refurbish and sell:
•Dealers buy used cars, refurbish and sell them at a premium (often with
certification and warranties).
65 •Dealers also facilitate title transfers from buyer to seller.
DEALERS FOLLOW MIXED MODELS IN THE USED CAR MARKET
•Transactions in the used car market differ widely from make to make, and model
to model, based on a number of factors such as car condition, vintage, accident
history, mileage, insurance records, etc.
•Dealers (both OEM-backed and independent) do not always stick to one model.
• To a certain extent, the choice of the business model is decided by the quality of
the used car.
•For example, an OEM-backed dealer would refurbish and certify used cars in
good condition, but offload the vehicles of inferior quality to dealers in the
unorganised market.
•Generally , Buy-and-sell model is more profitable than Park-and-sell. Model due
to the pricing power and potential value addition of certification and warranty.
66
 USED CARS : DEMAND DRIVERS

INCREASED SHARE OF ORGANIZED MARKET

67
 USED CARS : DEMAND DRIVERS

ORGANIZED PLAYERS’ PROFILE

• The organised market primarily comprises large OEM-backed players such as
Maruti True Value, Honda Auto Terrace and Hyundai H-Promise and
independent players such as Carnation, T S Mahalingam and Jain Cars.
• Mahindra First Choice, however, has a different business model. Despite being
a part of the Mahindra group (an OEM), First Choice is positioned as an
independent, multi-brand used car player that provides end-to-end service for
used cars, including auction, purchase and sale, valuation, certification and
warranty services.
•Unlike the smaller unorganised dealers, dealers backed by the OEMs have the
advantage of scale and a wide network.
•Continuous interactions with their customers (when offering after-sales service)
enable them to convince their customers to trade in their used cars for new or
refurbished cars.
68
 USED CARS : DEMAND DRIVERS

ORGANIZED PLAYERS’ HAVE HIGHER GROWTH POTENTIAL

• Certification of cars adds approximately 4 per cent to the selling price of most
small and mid-segment cars.
•Certification thus augments dealer revenues.
•Established brands, including both the OEM-backed brands and the
independent brands, have robust certification processes involving 120-200 point
inspection checklists.
•Certification of cars based on stringent criteria helps in enhancing the credibility
of the product, particularly for the price-sensitive target market.
•Some organised players who already have certification systems in place have
identified the accompanying warranty services as a potential revenue stream.
•A case in point is First Choice, which offers certification as a service to small-
volume dealers, as well as for cars listed on online portals like [Link].

69
 USED CARS : DEMAND DRIVERS

Quality certifications and warranties

•Used cars bridge the gap between aspiration and affordability, and provide

reasonably-priced options to every aspiring buyer.

•With the increasing availability of good quality refurbished cars, priced

significantly lower than new cars, and with added quality certification and

warranty, consumers are gradually overcoming their previously unfavorable

sentiment against the purchase of 'second-hand' cars.

70
 USED CARS : DEMAND DRIVERS

ONLINE CLASSIFIEDS

•Online portals such as [Link], CarWale etc. are exhaustive repositories of

used car listings posted by individual sellers as well as dealers.

•These portals have brought in greater transparency in the market by

providing prospective buyers with information on prices for comparison.

• Additionally, these online portals provide smaller dealers with a web

presence without the dealers having to invest in their own websites.

71
 Company Analysis

72
COMPANY’S SHARE PRICE

Jan 1, 1999 August 7,

73 2022
 Eicher Motor’s market capitalization grew more than 100 times
between 2008 to 2021.

• Eicher Motors

• This has been

achieved with

around 3.5% market

share in 2-wheelers

and 7% market share

in commercial

74 vehicles.
 While Motorcycles contribute 50% of revenues, it contribute 97% of
Eicher’s profits.

EICHER MOTORS: REVENUE AND PROFIT MIX

Commercial
Vehicles

Motorcycles Commercial Motorcycles

Vehicles

Source: Company Reports

75
SIDDHARTHA LAL : CEO
•Siddhartha Lal was 26 when he took over as

CEO of Royal Enfield in 2000.

• If you had spent Rs 55,000 to buy a Royal

Enfield motorcycle in 2001, you would now

have an old, rugged bike.

•But if you had invested the same Rs 55,000 in

shares of Eicher Motors, the company that

makes Enfield bikes, your investment will be

worth Rs 9 crores now.

76
MAJOR STRATEGIC DECISIONS
•Till 2004, Eicher group had a diverse spread of about 15 businesses including
tractors, trucks, motorcycles, components, footwear and garments, but none was
a market leader.
• Lal undertook an intense portfolio analysis and took a hard call.
•He 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.
• Back then, conglomerates viewed businesses as family jewels. It was a cardinal
sin to sell anything. But Lal sold almost everything.

77
 ROYAL ENFIELD TURNAROUND

•In the year 2000,Royal Enfield was in a very bad shape. Their monthly
production was 2000 units against a capacity of 6000 units. (Capacity Utilization of
just 33%)
• Directors of Eicher Motors decided to either sell-off or shut down the motor-
cycle division.
• Siddarth Lal convinced the board that the Bullet need to be given another chance.
• Lal, then 26, was an unabashed Bullet fan:
• He even rode a red-coloured Bullet while leading the baraat (procession) to
his wedding venue, instead of the traditional horse.
• Though the Bullet had its reputation,
1
following, an instantly recognisable build,
and aspirational value, it faced many challenges.

78
 CHALLENGES

• Competition:
 Liberalization of 1990s had led to the introduction of deluge of light, easy to commute, cost
Competitive bikes in the Indian market.

• Old Vs New Customers:

 Existing customers wanted their Bullets just the way they had always been. By modernising,
Royal Enfield risked losing traditional fans without possibly gaining any new customers.

• Quality
 There was a joke that the Royal Enfield Bullet travelled directly from Showroom to
Mechanic.
 Though the bikes had diehard followers, there were also frequent complaints about them
- of engine seizures, snapping of the accelerator or clutch cables, electrical failures and oil
leakages.

79
HOW ROYAL ENFIELD TRUNED AROUND?

• Design

• Quality

• Target Segment

• Product Mix

• Dealer Network

• Branding

• Exports

80
 CHALLENGES

• Design:
 The company had to deal with many basic design questions –
 Should the gears be shifted close to the rider's left foot - as in most bikes - or
retained on the right side? Long-term users were dead opposed to this
change.
 Many prospective buyers found the Bullet too heavy, difficult to maintain,
with the gear lever inconveniently positioned and a daunting kick-start.
 Engine was made of Cast iron that made it prone to oil leaks and frequent
seizures. Its ability to meet increasingly strict emission norms was also
suspect.
 A modern aluminium engine would eliminate these problems, but it would
lack the old engine's pronounced vibrations and beat - which Royal Enfield
81 customers loved.
 ROYAL ENFIELD: KEY DECISIONS

• The company decided to retain the bikes' rugged looks, including the build, the
design of the head lamp and the petrol tank, many of the old engine's
characteristics - the long stroke, the single cylinder, the high capacity with push rod
mechanism.
• But the company decided to make some bold changes:
• The gear lever was shifted to the left despite the opposition from long-term users
• The new aluminium engine, unlike the old, had hydraulic tappets, a new engine
arrangement, and fewer moving parts. But it did not produce the vibrations and the
beat of the old, but international experts were consulted and sound mapping carried
out for over 1,000 hours to ensure it produced the maximum rhythmic vibrations
possible and a beat, which was 70 per cent of the amplitude of the original.
• The new engine had 30 per cent fewer parts and produced 30 per cent more power
than the old, with better fuel efficiency. By 2010, all Royal Enfield models had begun
to use the new engine.
 ROYAL ENFIELD: KEY DECISIONS

QUALITY AND SALES EXPERIENCE

•Two other problems needed to be addressed: the quality of some of the
components Royal Enfield bikes were using, and the sales experience.
• To tackle the first, shop floor processes were fine tuned, while suppliers were
exhorted to improve quality levels. Royal Enfield also embarked on a large scale
internal exercise to tone up performance.
• Slowly, the tide turned. Engine related problems and oil leakages in Royal Enfield
products almost disappeared. By 2008 dealers were reporting lower workloads.
• Malfunctioning of the sprag clutch, on which the electric starter depends, declined,
for instance, from 5 per cent in 2005-06 to 0.2 per cent in 2010/11.
• Royal Enfield also began conducting marquee rides to promote leisure biking.
•To improve sales experience new company-owned showrooms were launched and
dealerships expanded.
 350 CC bikes contribute to more than 90% of the domestic sales

ROYAL ENGIELD PRODUCT MIX: DOMESTIC

MODEL WISE SALES (IN UNITS) MODEL WISE SALES (IN
– JANUARY 2021 PERCENTAGE) –
JANUARY 2021

Source: [Link]
classic-meteor-bullet-650/
84
WHY 350 CC?

85
 Bajaj Domineer or KTM could not dent the dominance of Classic 350
cc

Royal Enfield Classic 350 Vs Domineer 400

• KTM (390 Duke +
Month / Year Classic 350 Dominar 400
RC390) sold 5,891 units
Jan-18 53221 2072
Feb-18 48557 1982 in FY 2018-19.
• Apart from Classic 350,
Mar-18 50,111 1561
Apr-18 52075 1373
May-18 51147 1191 other models in 350 CC
Jun-18 50,426 1277
RE Bullet 350 and RE
Jul-18 44054 1381
Aug-18 44610 1122 Thunderbird 350, sell
Sep-18 44021 1095
Oct-18 46148 659
20,000 to 22,000 units
Nov-18 39025 170 per month.
Dec-18 34325 24
Total 557720 13907
Source: [Link]
bajaj-dominar-400/
86
 RE holds close to 90% share in > 250-800 cc segment.

ROYAL ENFIELD MARKET SHARE

KTM sold 63,187bikes in 2021 up from 22,627 in 2015

87
 The company significantly expanded the dealer network in the last 6
years.

STRENGTHENED THE DEALER NETWORK

No. of Dealers
2500
2105
2000

1500

1000 825

500 400

0
2015 2018 2021

Source: Company Reports

88
 RE Dealerships are not just sales points. They offer unique
experience.

RE DEALERSHIPS

89
 Royal Enfield’s advertising spend much less on advertising compared
to the industry average

ADVERTISING SPEND

Company Advertisement Cost as % of

• Lowest advertisement spend
Sales
Royal Enfield 0.5 to 0.7% •It rather focused on building
Bajaj Auto 2.5 to 3.5% communities by organising events
TVS 3 to 4% like Rider Mania
Hero 2.5 to 3.5%

Source: Company Reports

90
 Royal Enfield annual sales volume grew from 25,000 in FY 2000 to
6,00,000 units in FY 21 and expected to double in the next 3 years.

ROYAL ENGIELD’S : SALES VOLUMES

Source: MOFSL

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 FOCUS ON EXPORTS

•In 2012, Lal shifted focus to international markets.

•The company exported a mere 3,000 bikes annually in 2012, but Lal believed Royal
Enfield can be a sizeable player in international markets a decade from now.
•He made some strategic hiring with this goal in mind.
• Rod Copes, a former Harley Davidson manager has been hired as president
of North America (based in US);
•Pierre Terblanche, head of the industrial design team was snagged from
Ducati;
•James Young, head — engines has worked in Triumph, and was hired in UK.
•Simon Warburton, head — product planning and strategy (new projects) also
comes from Triumph.
•Mark Wells, head — programme (new projects) and Ian Wride, worked on
Enfield's Classic and Continental GT models while they were with the design
firm 'Xenophya.‘
•Rudratej Singh from Unilever1
for marketing .
• In 2021, exports increased to around 38,600 units (1300% over 2012 volumes) and
export to more than 50 countries including developed markets like US, Germany,
UK etc.
92
 From just 3000 units in 2012 exports increased to 78,693 units in 2022

EXPORTS

FY 18 FY 19 FY 20 FY 21 FY 22 FY 23E
Exports 19,264 20,825 39,188 38,622 78,693 1,00,694
in Units
YOY 25.2 8.1 88.2 (1.4) 103.8% 28%
Growth
in %

Source: Emkay Research

93
 FROM BIKES TO TRUCKS

•Lal turned his attention to trucks in 2006 after turning around Royal Enfield.

•The group pushed hard for a breakthrough in the truck business.

•He struck an alliance with Volvo, which also brought in equity.

•Eicher and Volvo hold 54.4% and 45.6% respectively in the joint venture VE

Commercial Vehicles (VECV). This alliance too has led to shareholder value

creation.

•Though VECV is the number 4 player in terms of market share, it has managed to

1 and Heavy Vehicles segment which give higher

be a strong player in the Medium

margins.
94