Royal Enfield scouts for third chip vendor to ramp up production

Royal Enfield has said it is looking to rope in its third semiconductor vendor to mitigate chip shortage and ramp up production at its facilities. The company has recently tied up with its second semiconductor vendor for creating an alternative vendor ecosystem to mitigate the impact of the shortage on the supply front.

Royal Enfield scouts for third chip vendor to ramp up production

By: Sajan C Kumar

Iconic bike maker Royal Enfield has said it is looking to rope in its third semiconductor vendor to mitigate chip shortage and ramp up production at its facilities. The company has recently tied up with its second semiconductor vendor  for creating an alternative vendor ecosystem to mitigate the impact of the shortage on the supply front.

B Govindarajan, executive director, Royal Enfield, told an earnings call recently that it has plans to appoint its third chip vendor in order to further ease the chip shortage. “ We had only one vendor and subsequently on-boarded a second vendor and now we are looking for another vendor also.  We will be slowly then ramping up our production, and we have a healthy order book on the back of recent launches, “ he said.

The ongoing chip shortage has impacted the performance of the company and was down by 15.6% in the third quarter. “We are working towards developing an alternative vendor ecosystem to minimise the impact of the shortage,” he said.
In the third quarter, despite headwinds, Royal Enfield continued its strong growth momentum in Q3 in international markets with total exports at 17,036 units, more than 57% increase over 10,833 in the same period last year and more than 2X increase over Q3FY19-20.

“All our export markets have done outstandingly well. We prepared the market, the ‘one store one location’ did catch up well and we went for brand pull for that strategy. Going forward, our international growth is going to be our very good,” he said.
Royal Enfield’s performance across Europe and Americas has consistently registered growing trends, and the company continue to deepen presence and engagement in these markets. During the quarter, it also commenced operations at its CKD facility in Thailand.

In addition to catering to consumers in Thailand, this assembly unit will act as a distribution hub for all other countries in South-East Asia, including Indonesia and Vietnam. With this, the company now has three local CKD units — in Argentina
and Colombia in Latin America, and in Thailand.

According to the company’s investor presentation, Royal Enfield is evaluating opportunities to set up CKD facility in priority markets in APAC and LATAM region.

The company said the share of revenue from international markets has grown 3X over the last 5 years. It has plans to launch of new products to expand the global product portfolio and presence in new
categories.

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