Demand’s Back For Royal Enfield But Broken Supply Chain Is Hurting

Royal Enfield is sitting on a backlog of more than 40,000 bookings as supply-chain disruptions hinder its ability to deliver its popular Classic, Bullet and Thunderbird motorbikes to buyers.

“We are quite excited on the demand side but a little bit frustrated on the production side. We are limited by supply chain and not by capacity,” Vinod Dasari, chief executive officer at Royal Enfield, part of Eicher Motors Ltd., told reporters on Thursday. While online inquiries have gone up by four to five times compared with the pre-covid level, not much is in the company's control, he said.

Royal Enfield sold about 60,000 motorcycles on an average every month till the pandemic struck. The national lockdown disrupted the supply chain, Dasari said, and state curbs continue to impact production.

The two wheeler industry largely depends on Gurugram, Aurangabad, Pune and Chennai for supply, Dasari said in an post-earnings analyst call. “If one of the areas goes into the lockdown, it disrupts everyone, not just one.”

Eicher Motor reported a net loss of Rs 55 crore in the quarter ended June compared with a profit of Rs 452 crore a year earlier, according to the exchange filings. The company also bought the bus unit of the Volvo India for about Rs 100.5 crore.

While it saw demand rebound for its middleweight premium motorcycles, led by increase interest in tier-2 and 3 markets, recovery for the commercial vehicle segment appears distant.

“From the commercial vehicle sector point of view, it was a tough quarter as demand continues to remain low,” Siddhartha Lal, managing director of Eicher Motors, said. That led to 72% drop in overall revenue in the quarter ended June for VECV, its joint venture with Volvo Group, to Rs 641 crore.

Key Concall Highlights

• All nine plants/facilities of VECV are operational and are running at 20% capacity utilisation due to poor demand.
• All dealers are operational.
• Working towards electric vehicles; have made some prototypes.
• Tier 1 demand to increase as lockdown restrictions are eased.
• Aim to increase the revenue share of export market from 5% to 20% in the long term.