Chennai: Royal Enfield will grow and replicate its India success globally by becoming the leader in every market it enters.
The company has just added Argentina to its tally of global markets and plans to get into third party contract assembly once its presence in big volume markets like Indonesia and Thailand reach critical mass.
“We crossed 8,20,000 units in overall sales in FY18 and plan to hit 9,50,000 units in overall production this fiscal,’’ said Lal. Critical to that near million production target is the capacity addition from phase 2 of the company’s Vallam Vadagal plant near Chennai. “We will invest Rs 800 crore in the Vallam Vadagal phase 2 capacity expansion as well as in the Chennai technology centre and in product development this year,’’ said Lal.
“The second phase of the Vallam Vadagal plant will start production towards Q2 or Q3 of next fiscal which will help with the switchover to BS6 as well. When it reaches peak capacity it will add 25,000-30,000 units a month or around 3,50,000 units a year to our overall capacity,’’ he added.
As for exports, the company — which sold 19,000 units, up 26% in FY18 — is looking to consolidate its presence where it already has a foothold looking at growing its footprint from just 1-2 stores to 30-50 stores in the long term. It will also consider local assembly but through contract manufacturing.
“In markets like Thailand and Indonesia, the first step is to have market companies for marketing and distribution and the idea is that this should be followed by local assembly,” said Lal. “Our preference is to contract manufacture rather than to set up our own assembly to avail of tax benefits,” he said. The company is also getting into pre-owned motorcycle stores and plans to open 10 this year with a nationwide distribution format in place in the next few years.
Eicher took a Rs 187 crore write off on account of the closure of its joint venture with American auto major Polaris. This has sharply dented its profitability both in the fourth quarter as well as the overall year. “After Polaris, we are going to be 100% focussed on motorcycles only,” said Lal categorically.
“There is no intention to enter anything else at this point and the only other part of our business will be VECV.’’ Eicher will invest Rs 500 crore in VECV on new products, new technology and expansion of capacity. Eicher Motors consolidated PAT grew 18% at Rs 1,960 crore for FY17-18.