Eicher Motors

(Balusu Aditya) #570


(AKGupta) #571

Hero has come out to deny any partnership talks but imo it would have been a great partnership for both. Hero would get a huge leg up in premium space, reduce reliance on 100-125cc segment. Harley would get local mfg expertise from the 2W market leader!

(Balusu Aditya) #573

Q1FY19 Results

(Dhiraj Dave) #574

Key discussion point in Eicher Conference call on August 9 2018:
Opening remark

  • Twin motorcycle is ready. Eicher would conduct global media ride in End of September and expect booking to open by November and Delivery to start from 2019.
  • Limited Edition Pegasus Bike was a great success. All 1000 bike (of which 250 were kept for India) sold out within 180 seconds of online booking opening.
  • 15th Edition of Himalayan Odyssey ride include 60 participants (10 women including 2 army offices)
  • Construction of phase II plant at Vallam Vadagal facility is expected to commence production from 2nd half of FY20. Chennai Technical centre is ready with moving of product development part by end of 2018. By 2019, all other offices would be moved to new technical centre.

In VECV, higher realisation due to increased share of heavy vehicles was main driver for sales growth in Q1FY19. The company vehicle, particularly in Pro 6000 and Pro 8000 would be benefiting from the Axles related new CV rule by Government. The Engine used by VECV has better power and torch as compared with competitor and hence with higher load, these trucks would run at relatively better speed providing better economies to transporter.

RE India market
Inventory of RE has increased due to transporter strike in July 2018. The company is now able to supply most of model within month of delivery. Supply and demand are broadly match with booking order book coming to negligible level. The company would produce only to supply and in case they realise the product is not moving, they would rather close the production and take hit of quarterly numbers then the continue production. The company has sufficient capacity for expected demand for new twin bikes. In domestic market, Karnataka and Maharashtra demand has been affected by local factors, demand for UP, Bihar and Rajasthan would be next growth driver. Even for Twin new bikes, the company expects good demand from Kerala Chandigarh, Punjab and Delhi market.
In domestic market, the demand for premium model like Gun Metal Classic 350 and Thunderbird X has surprised the company as well. They are observing increasing premiumisation in the market and hence expect good demand for new twin bikes. Total dealership is now around 837 (12 addition during Q1) and expected to reach 950 by end of Year. Nearly half of order book now in premium variant.

The company would continue to focus on digital market as against TV and Print. They would traditional media like TV with focus advertising like promotion of Himalayan rather than Lazy advertising in typical way on Print and TV. The marketing efforts would be more in events, store, rude and social digital promotion as being done currently RE even for new twin products. The same store growth (with 24 months operations) for dealers in India was around 10% YOY which is around same rate as last year. Nearly 50% of stores were only operational two years back. It wants grow at 2X of Motorcycle industry growth. Nearly 45% of products are now financed as against around 30% at time Demonetization period.

Global market
The company would like to be slow and steady and move forward in controlled expansion rather than mindless expansion. Initially they start with couple of store. They try to understand factors driving the customer behavior and whether the brand is perceived in right way then would slowly like to increase store to 5 and eventually to 50. While in Columbia, the company got positive feedback and increased store of 5. Depending on success it would eventually same to 50. Brazil, Indonesia, Philippines and other countries (with 1-2 stores) also would follow same model for scaling up global operation. There are currently 37 international stores of RE.

The company is scaling up operation to its ambition. The head count has increased due to meet these aspirations. The company is able to attract high caliber people in its team which resulted in higher cost which is expensed while benefit of same would materialise in future.

Discl: Eicher Motor is among by Top 2 holding and my view way be biased. There might be some miscommunication from my side. The investor shall note of that and shall do his/her own due diligence before making any investment decision

(Yogesh Sane) #575

Here is some data I collected from investor presentations.

Source: Company IR Presentations

Eicher has been able to grow sales rapidly over the last few years because it added dealers and sales at each dealer grow strongly from about 377 motorcyles per year in 2011 to 995 motorcycles per year in FY 2018. However, this number appears to have reached a peak. Hero motocorp dealers sell about 1100 motorcycles so number for eicher may have reached close to the capacity of a dealer. Sales per dealer is a proxy for market saturation. Majority of potential customers in the areas served by the dealers are already customers and future sales growth will come from upgrades, second purchase or general growth in incomes.

Since sales per dealer has remained stagnant for last 2 years, almost all the sales growth has come from new dealers added during the year. Even there, Eicher appears to be have reached a peak. New dealer additions were 148 for FY 17, 150 for FY 18 and company is projecting another 120 dealers in FY 19.

Given the trends in sales per dealer and number of new dealerships added, sales growth could drop to 15-20% over next 2-3 years. This a sharp deceleration from 45% growth company achieved over last 5 years. Market may not not have priced in this slowdown.

(Deepak Venkatesh) #576


I think the offerings in the Indian bike market actually has a void around the price point from 3L to 5L. With the twins - Continental GT650 & Interceptor 650 this specific region will get completely taken over by REs. The rumour is that the pricing is from 3.5L onwards slated for April 2019 launch. No manufacturer has any worthwhile product in this pricing point and insignificant sales to speak of.

But models other than the 350cc in the RE line up actually don’t contribute much to sales number in India. The Himalayan & Continental GT single cylinder have been failures in our country both failing to sell less than 700 and 100 respectively on average monthly in the last 30 odd months. Also I have this eerie feeling the Yezdi’s which will launch around the same time and will eat up the share of REs across the engine platforms in quarters to come.

I have not studied the accessories offerings.

Share of engines by RE


(Nikhil Rodrigues) #577

Thanks for the number crunching @Yogesh_s bhai. At expected sales of 9.5+ Lakhs for FY19, Eicher is near saturation. In my opinion the volume growth for next few years will be couple of % higher than overall motorcycle market. 10% volume growth + 3% pricing growth + 2% growth due to shift towards premium models / international sales makes Eicher 15% grower for coming years.

Market is already pricing it with stock trading at less than 30 PE FY19 vs valuation of 60-70 PE that it used to command 3-4 years back. In fact the slower expected growth is reason the stock has moved nowhere for 2 years. No other brand with such a following, market share and ROCE is trading at this valuation.

Disc - Holding Eicher. My views might be biased.


I attended Eicher Motors AGM and as per management they are doing a roadshow for twins in California in Sept’2018 and will be launched simultaneously both in India and Internationally in month of Nov (during Diwali season). They have total 37 their own retail points across world (outside India) and that might add in Twins sells in Q3 and Q4 of 2018-19.

(Aman Goklani) #579

@ash7979 will it be possible for you to share your notes from the AGM? If you could that will be great as it will help existing Eicher investors and other boarders. Thanks.

(Yatharth) #580

Sir, how many non-financial, mid/large companies in India have a Sales and profit growth of 15-20% consistently, say over 1, 2, 3 years and available at less than 40 PE? Not even 5. Even if we ignore PE, it is still not 10. So even with that kind of consistent growth Eicher Motors will continue to be at-least amongst top 10 performers amongst non-financial world. Stock price is a different matter. But for anyone looking for stable and good performance in his portfolio, choices are not there.

(Dhiraj Dave) #581


Very good pespective. appreciate your working. However, just thinking aloud and trying increase analogy to Car industry of the same point you attempted with Hero, we get altoghter different perspective when we apply same on Maruti past data.

Year Domestic sales Delaership Domestic Sales/Dealership
FY2006 4,92,257 375 1,313
FY2007 6,35,629 491 1,295
FY2008 7,11,818 600 1,186
FY2009 7,22,144 681 1,060
FY2010 8,70,790 802 1,086
FY2011 11,32,739 933 1,214
FY2012 10,06,316 1,100 915
FY2013 10,51,046 1,204 873
FY2014 10,53,689 1,310 804
FY2015 11,70,702 1,619 723
FY2016 13,05,351 1,947 670
FY2017 14,44,541 2,312 625
FY2018 16,53,500 2,627 629

In view of above data it seem that conclusion of 1100 vehicles per dealship being peak for Two wheeler may need some more detail analysis in my opinion. The increasing per capita income drive sales singificantly in rural india (or tier 2 and 3 cities). For instance, share of Rural demand in total sales for Maurit has increased2 from 3.5% in FY08 to 32% in FY14. Maruti is not sharing Rural details in annual report as per my understanding.

Show increased growth by dealership in rural area still can drive growth with lower sales per outlet, if Maruti past experience is applicable to Two wheelers as well.

Once again thanks for brining out very important perspective on Eicher.

(Dhiraj Dave) #582

Excellent working. Can you please share source of information?

While market is really becoming competitive, I believe increased compeitition also lead to industry expansion. I would be see Harley/BMW as more serious compeitition than Yezdi. Even Mahindra past experience in two wheelers market was not that great. Having said that, it would be difficult market to compete for RE for sure in next 5 years as against previous 5 years. On a positive side, we find Bajaj, after trying to compete with RE has shifted its focus on mass market. While that does not mean Bajaj would not be compeiting in 250 CC + market, however, change in focus would definitely reduce fiercefulness in market in my opinion.

Thanks for brining wonderful perspective and I agree that moving up to 500 CC+ is next major chellange for RE in next 2 years. It can not just ride on past success of Classic/Bullet for sure.

(MHS) #583

Lot of info in the latest Investor presentation about motor cycle market/opportunities - refer pages 18 to 24.

FY 18 2W india Sales 126 Lakhs: Eicher sales 8.20 Lakhs - 6.5% only.

As the economy grows, urbanization grows discretionary spending rises, refer below snap shots, people aspire to drive higher end bikes, its evident from below snap shot, the growth of (>250cc) bikes is higher than the (<250cc) bikes from FY15 to FY18 :

Royal Enfield - Its a Brand.

(Deepak Venkatesh) #584

Hi @dd1474

Thanks for the appreciation.

From a product placement there is a void in the area in which the twins are launching. The below chart roughly captures the essence what I am trying to communicate.
X axis is the engine capacity, Y axis is the price point, the square solid colors are current products, the arrows denote the usual evolution of the bikers in each segment with comments in italicized purple text and the yellow circle is the void for the twins.

apologies for this rough sketch

I think the ones who buy a commuter is trying to extract as much as possible from their bikes (very price and thus mileage sensitive) but as we progress into other buckets the needs and aspiration changes. As rightly pointed out in the deck the discretionary spend is increasing and thus the evolution to a step up will happen more frequently and in larger quantities. For instance I know a person who started with a Bullet evolved to a Ninja and now runs a Triumph Tiger full specked out adventure version. So that went from ~1.5L to 17L in 4-5 years! I know this might be an exception but the urge to upgrade is very strong in the higher segment bikes.

From a pricing perspective there are a few main competitors to the RE stable right now. Plus a notch above the 500cc RE is Harley Davidson 750 and the Benelli’s 650cc and Kawasaki 650cc and the starter Triumphs. Except Benelli 650cc (which is at 6-7L) the rest is very highly priced.

The chart below shows the monthly sales of each model which probably eat up the share of the REs. Some of the bikes cater to a different user profile ex Dukes which are more for younger folks but one of the most technically advanced bikes.

There are more bikes which can be put in this eg Duke 250 but I think we get the general trend. If priced right there is perhaps going to be a market for a 650cc bike at 3.5L price point. The 650cc or a 500cc+ bike which one can buy cheapest today is a Kawasaki Z650 with an exshowroom price of 5L Delhi. A Yezdi directly takes on the yesteryear feel of 2 stroke bikes. I agree it wont dent RE’s sales but I have seen die hard fans who spend lakhs to maintain their beloved Yezdis and Yamaha RD 350s.

On the data source. I collate data points from another forum I am a member of ie teambhp. I am putting this up in @Yogesh_s 's google sheet. Both 2 wheeler and 4 wheeler. Hopefully by weekend I will update.



Since we are discussing different segments of motorcycle market, I would like to also bring the recent article where Rajiv Bajaj quoted RE.

“No company can compete successfully in every segment. May be it sounds defensive to you, but let me give you two examples. Yes, it is true that Hero (MotoCorp) participates in scooters, but do you know that in a segment which sells 5 lakh motorcycles a month including the sports motorcycles and exports Hero does not have much of a presence there. TVS (Motor Company) participates in scooters but completely misses out on the middle motorcycle market which is worth 7 lakh motorcycles a month. Now both these markets are equal to if not bigger than the scooter market”, said Bajaj.

Unsatisfied shareholders insisted that they wanted Bajaj to regain the pride it had when it built and sold scooters under the Chetak and Super brands. But an undeterred Rajiv Bajaj provided another example to support his argument before signing off on the topic.

“I can assure you for any company, especially for us, to participate in every single segment. Best example of that is that of my friend Siddharth Lal (managing director and CEO and Eicher Motors which owns Royal Enfield)”, Bajaj said.

“He participates in almost no market and his company does very well in because it stays within its given niche of making a Royal Enfield as Royal Enfield should be. So I have only one request. Before you ask me again next year to make scooters can you please ask Siddharth Lal to make scooters? If he makes scooters I promise you I will also make scooters. Siddharth Lal makes 29% EBIDTA margin, perhaps even more because he does not make scooters”, added Bajaj.



Rajeev Bajaj is losing it out to RE and they have done a advertisement to compare RE with their Bikes and tagline was “Haathi mat palo” and ridiculing RE owners in the ad.

Bajaj lost 250 cc plus market to RE and they never able to make any impact in 100 cc commuter segment and in their AGM he actually said that they make loss in Platina (their commuter bike) and they were surviving on exports to Africa with Boxer & Platina… I feel lits high time they should make Scooter as that is big market or else Hinda, Hero and Eicher Motors will finish this old and iconic brand as I dont see any chance they can beat Honda and hero in commuter segments because of sheer size of Hero and now honda as well and their Brand “Pulser” has brand fatigue now…

(Balusu Aditya) #587

(Aman Goklani) #588

Nice read.


This is slightly off-topic.
Not related to investments directly. But definitely related to the Royal Enfield.

Thought of sharing this if people would be interested in knowing everything related to Royal Enfield and its brand image.


There is also a wikipedia page on Om Banna.

Moderators, you may delete this post if it is diluting the content of this thread.

(abhi.bajaj) #590