Twin bikes can make Royal Enfield a global company in next 5-10 years, says Siddhartha Lal

Siddhartha Lal, managing director and chief executive officer, Eicher Motors was just 30 years of age in 2004 when he took over the charge of chief operating officer of Eicher Group, which then had a diverse portfolio of 15 businesses ranging from motorcycles, trucks, tractors, garments, components, footwear. Over a period of time, he divested the 13 businesses and put his energy and money only on two -- motorcycle and truck. Since then the company has come a long way, especially its motorcycle brand, Royal Enfield, which today has grown by leaps and bounds. Lal spoke to Shahkar Abidi on the sidelines of India launch of its latest product-- Continental GT 650 Twin and Interceptor INT 650 Twin mid-sized motorcycles, where he discussed at length about the company's global and India strategies, recent industrial unrest at the Chennai plant and the benefits of having a single specification of its latest products, among other things.

How are Twins models placed in your business strategy. Where does Royal Enfield go from here?

It gives us the platform that can make us a global company in next 5-10 years. In markets around the world, including in India, there are some modern classics, but they are with much higher capacity and much more expensive. There are no true middle weights (motorcycles). In the true middle weight category, there are no such modern classics. So yes, there is a lot of opportunity for growth in the segment and that is why we are here for.

Harley too is trying to bring some middle weight category products in the market?

That's a good point. It is not that there isn't (middle weight motorcycles). There might be some, but they are not successful. None of them is a breakaway success. Because there is something missing from the overall offering. So I believe we will be able to make it. Also, there is space for everyone to compete and grow in the segment.

What kind of volumes are looking you at for Twins? How big is the market for middle weight category motorcycles globally and in India?

We do not make forward looking statements. The market size is relatively small globally. I think we can expand the market over next five years. Above 500cc, the market in India is around 10,000-15,000 motorcycles, whereas, overall the market is 20 million. So 10,000-15,000 units is just 0.1%, which is nothing. The way Royal Enfield has been able to grow in size (in 350cc) in India from virtually zero to now million, we think we can do the same in global markets for the Twin bikes, that is our objective for the next 5-10 years.

Does the Twin broadly remain for global markets?

The 350cc is basically India-oriented. Twins, from the day one are made of a single specification for the entire world. It's a global bike by its design and vision. However, India obviously is super-critical for us because that is where we are distinguished, that is where we have the understanding and that is where we have customers, 3.5 million of them. And India is from where we can get scale. If we are able to do justice to this product and get huge in India, that will provide us a better cost structure. Already, our cost structure is good in India. We can make cost structure even better because of the scale and that will give us muscle in the end so we can sell these Twins in markets around the world at a true middle weight pricing. Otherwise, middle weight motorcycles end up being close to heavy weight pricing. We want to make this bike accessible for the people to try and have it.

Can we expect more motorcycles on this platform?

Not just yet. Our focus right now is exactly on these motorcycles because of all the new emission norms that derailed all of our product plans we had a couple of years ago. For now for the next couple of years, this is what we have got. After a couple of years we may. But nothing for now.

So the production will all be in India or are there plans to make it global?

It is not needed. We can make world-class products, and (for it ) we don't need to go anywhere else. The only reason we may eventually end up doing assembly in Brazil or in Thailand is from the tax perspective. But that will also be minimum completely knocked down (CKD) type. We are studying different options, but the intent is as much as possible to have our production to be in Chennai (India).

Recently, there has been a major industrial disturbance at your plant in Chennai due to which production of around 28,000 units was impacted. You blamed some "external influence" for it. Can you share something more on that?

It was a tough period for us. The external influence was the main sticky point with the striking employees. They wanted us to recognise a third party person who has no bearing. Our point was that you have absolute liberty to form a union, but it is also our prerogative to talk with you guys (union) and not an external person, who actually has no interest in the well-being of the Royal Enfield or in fact employees. They have their own profit objectives or other things. That was it.

You spoke about having a standard product with the same specifications globally. Apart from saving some costs, do you think having the product fine tuned for India market would have been more useful?

I would say no to that. The whole concept was to do extensive testing for markets around the world. We found that from power, delivery; we can have one specification. Even from the suspension point of view, where of course India has a lot more bad road conditions. We set up suspension that works extremely well for India. We have a single specification around the world and that is very helpful because then nobody feels that they are getting inferior motorcycles. That is always an issue people have had. The only thing is sometime we have different versions. For example, Euro IV version emission norms in Europe might be different from norms here. Similarly, there might be different lighting norms. We have harmonised everything and have single highest specs for every market in the world. Also, that has helped us in the testing only one type of model. We do not have to do same on 30 different variants, so that helped us a lot.

How was the sales during the just concluded festive season?

It was alright for us. It was reasonable. We had of course production problem and all. Basically, our retails were strong. So, considering everything I think we did quite alright during the festive season.

How is the growth of your truck business, especially at a time when the industry seems to be slowing down a bit?

It is progressing very well and is moving in the right direction.