In the last two years, Eicher Motors with its flagship motorcycle model, Royal Enfield, may have managed to grow its volumes substantially in the domestic market unlike some of its competitors, but in the days to come the going may get tough for it.
The company, which is moving into newer, premium bike segments where price is above Rs 1 lakh, has not been able to replicate the success of Royal Enfield.
Besides, the huge bookings, deliveries for which are slow and will take quite some time to fulfil, is likely to witness moderate growth once the orders are complete, feel analysts.
“While Royal Enfield has created a niche for itself over the years, moving forward we believe that growth rates will moderate from elevated levels earlier as pent-up demand is now normalising as the waiting periods are coming off,” JP Morgan said in a recent report on the company.
“After having met with success with the Classic range of bikes, Eicher is attempting to expand its offerings by introducing models in new sub-segments – they had launched the Continental GT (Café Racer) earlier, powered with a 535cc engine followed with the Himalayan in the current year. We will monitor the consumer response to the new product (the earlier GT met with a tepid response),” JP Morgan added.
“We expect volume growth to come off from the current 50% plus levels to 27-28% in second half of 2016 and to 18-20% levels in 2017. This is reflective of lower growth rate in underlying new order generation,” said IIFL in a report on the company.
In December last year the company increased its production capacity to more than 52,000 units in a month from 36,000 earlier.
It aims to increase its capacity to 6.5 lakh motorcycles in a year from the present capacity of 4.5 lakh. As a result the waiting period has reduced to 2.5 – 3 months from the earlier 5-6 months.
Industry experts also pointed out that the good performance of the Avenger series of motorcycles from Bajaj Auto can dent the prospects of Royal Enfield products.
“US-based United Motors (UM) is also planning to launch two motorcycles Commando and Sport, to compete with Royal Enfield in the R150-200k price range. UM plans to set up 40 dealers over the next 2-3 months,” added IIFL.