I like the game of Kabaddi. For the uninitiated, it’s a team based contact sport that Wikipedia imaginatively describes as a cross between wrestling, tag, rugby and chanting. The sport originated in Tamil Nadu a few centuries back, and has since grown in popularity. Nowadays, it's played regularly in the Indian sub-continent. Since 1990, it has been a part of the Asian Games.
Its surge in popularity has been astonishing during the last few years. Apart from the National team, we also have a Pro-Kabaddi league with star players emerging every year. Thanks to a large population of Indian origin in North America and UK, we now have local Kabaddi leagues in these regions. While their reach may be debatable, these leagues do give filmstars a sort of an evening job.
Unfortunately, the growing popularity of the sport is a big problem for the country. You see, India has won seven gold medals in Kabaddi in the Asian Games since 1990. Count carefully and that is how many editions of the games we have had since the year. Our biggest rival has been Bangladesh and there seems to be no number three. Probably, the Indian team can defeat the Japanese team, blindfolded.
Read about: Nationalism and the Indian Vehicle Industry
This strength is our weakness.
If Kabaddi continues on its popularity growth trajectory, we would be rooting for its inclusion in the Olympics by 2032. Then in 2036, a China or Australia will notice the sport.
Crap! Party over!
Retro Bikes - The India Story
Royal Enfield is the Kabaddi of the bike world.
For decades it was an ancient Indian bike manufacturer which had imported Its tools & dies from a business going out of favour in the UK. Since then it has been making bikes that look like nothing else, sound like no-one else, feel like nothing else, and have a cult following that is the envy of everyone else.
Being generous, I would call it the Mad magazine of the Indian bike world — “Ahead in a league of one.”
Frankly, the brand was down in the dungeons for a long time and the other players worried about it as much as a Starbucks would worry about Chic Chocolate cafe on Mall Road, Mussoorie.
The Early Adapters, After the Milkmen that is
But then something magical happened. People started buying these bikes. The early adapters — after the milkmen had moved on to Rajdoots — were the cool guys. These were talented guys who had an individualistic streak or the desire to have one. They were different, ripped, had ponytails, drank lots of beer, and perhaps had great sex.
They were rebellious, yet mature; dark, yet honest; rugged, yet sensitive; coders but not geeks.
Most importantly, they were men, not boys. The boys rode Pulsars and CBZs. The boys did traffic light drag races. Boys acted silly.
The men? They rode to the Himalayas over the weekend.
Soon everyone noticed the cool guys and wanted to be one. More and more people wanted to be individual in the neighbourhood.
The snowflake became a snowball, which turned into an avalanche.
As India prospered and urban incomes multiplied within a short period of time, the desire to have an identity superseded everything else on Maslow’s pyramid of hierarchy, Owning a RE was a surefire way of getting noticed.
The result was extraordinary. Over the last 17 years, Royal Enfield sales went from an average of 2000 units per month to more than 60000 units in a good month now. That’s mind-boggling whichever way you slice the data. As an advisor, I told my stock market brethren to buy the Eicher stock completely based on REs profitability.
What makes it even more impressive that the company added only four new models - not counting paint jobs - to its range in this time period. One of them bombed, another is struggling and the bread & butter-chicken are still supplied by two main models and the older generation.
So What’s the Problem?
The problem is that sometime, a few months back, Royal Enfield ceased to be a niche bike manufacturer. It is now the 5th biggest brand in the Indian market, doing 600k units last year. That’s more than Yamaha, Suzuki, Mahindra, Piaggio, Aprilia, Moto Guzzi, Hyosung, Ducati, Harley-Davidson, MV Agusta, Indian, Triumph, Kawasaki and Benelli. (Add any other exotic brands that I may have missed.)
Most importantly, brand RE is still growing at a mind-boggling pace. Its annual growth rate has been hovering above 30% and last month was the first in a long-long time when the brand’s dispatches grew slower than 20% year-on-year.
Interestingly, Royal Enfield only does bikes upwards of 346cc and makes all its money across three SIAM segments. Most RE bikes share a lot of components and are built around 2-3 chassis architecture. That spells healthy margins and also makes RE a sitting duck for a competitor.
The Competition Awakes
The competition is arriving - Honda’s recent announcement that it will develop a new bike to take on RE in India is perhaps the most direct attack on the brand till date. However, it’s not the first one. RE has been under attack from below and above. While the ever increasing Pulsar and Apache ranges are a threat from below, the Hyosungs and the entry-level Triumphs and Harleys have been eyeing the market from the top. Anoop Prakash, the former head honcho of Harley India, always looked at booming RE sales as promising for his brand as these customers would eventually graduate to riding Harleys.
That didn’t quite happen as planned but the threat to RE stays.
Meanwhile, the threat from below is becoming more real. Bajaj introduced the Dominor with an under-stressed 373cc engine. The aggressive pricing means that Himalayan raiders now have another budget option to look at. Sales have started off well and Bajaj dispatched more Dominors last month than RE did Himalayans. Buoyed by the response, Rajiv Bajaj has already promised more products built around the platform, some even more directly rivalling Royal Enfields.
However, the Honda threat is serious. For once a brand has directly named RE as a target. Honda is also committing more resources to the project, with product development headed by the team in Thailand. Honda is also hungry for success. The brand faces a strong rival in Hero MotoCorp at the bottom of the pyramid but reckons it can take on Bajaj-RE in the bigger engine segments.
Honda’s eagerness again stems from the fact that RE has been ahead in a league of one.
I have always seen the success of Royal Enfield as a market maturing and benefitting the only incumbent. They were like a paper kite, not doing too well, till the time a strong gust of wind blew them upwards. Let’s be clear, they didn’t sprout wings or learn flying to succeed. It was mostly the wind and the brand’s ability to fly with it.
On the technology front, Honda or Bajaj have very little to worry. Royal Enfields are simple in construction, come with little new-age weight saving tech and are at best moderate in electronics. Replicating everything and making it considerably better is easy for a deep pockets brand like Bajaj or Honda to achieve.
The problem is in the details. Royal Enfields have never been hot on technology. Neither are the buyers buying them because they dig high tech. Its the coolness factor. Unfortunately Honda and Bajaj - and I am inviting controversy here — have no coolness standing next to Royal Enfield.
That coolness may very well be the Captain America shield for RE. However, keep in mind that Captain America survives everyday just because the dumb super-villains haven’t figured out that it’s easy to shoot him in his legs.
Once rival brands crack the coolness part and provide considerably better products, RE faces a real challenge. Even without ticking all the boxes, a simple addition of new products from mainstream manufacturers is a big enough reason to worry at Royal Enfield.
Author: Deepesh Rathore is a Director at Emerging Markets Automotive Advisors (EMMAAA)
Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or any employees.