We are betting on the marketing capability of RE. If you spend some time to visit the RE showrooms and talk to prospective customers, you will understand what they have done. They have spent very less but they have achieved very good foot falls in the US. Now all I am tracking is the conversion of this footfall in to sales. I don’t want to publicly give more details on the marketing strategy for obvious reasons but if you are tracking RE in the US, you would know where the customers are coming from.
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Sorry but i am not tracking their US strategy. If you have more insights and think fine to share on how customers are coming, it will be good to know. Thanks
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RE reduces price of new Bullet 350 by around 9k INR. Are they testing price sensitivity?
I think what RE should do is that rather than decreasing the price it should increase the quality of Royal En field. RE should keep its brand and image as Royal and pricey. Any RE owner would not like RE to be sold like TVS or Hero and if it starts selling like that then it will loose its charm.
My suggestion is you add value & quality, add standard accessories and keep it exclusive.
Disclosure : not invested but tracking
They are coming up with premium product with Twins (650 cc engine) with higher price and wants to fad lower 350 cc to ppls who are looking for cheaper RE and for aspirational ppls they want them to upgrade to Twins, so that they can play both world… Right now its available even less then Bajaj or TVS PE with best EBDITA margin in entire auto sector and Best of breed of promoters (they never had a single promoter related issue) No debt and Pricing power, adding export market while opening standalone RE stores outside India than exporting in bulk… So its one of the best value buy stock as of now…
Disclaimer: Holding since last 5 years and holding in thick & think of times…
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Extremely positive about how its export story is showing signs of significant progress now that it has the product and global talent in place. However, my negative view on the business has been because of its margins. With Eicher making highest margins than any other OEM (I think this may be true not just in India but globally), the margins were susceptible to come down. The gap in margins is extremely wide compared to other OEMs. After a long time, Eicher now is operating significantly below 100% utilization and is further expanding the capacity. Additionally, future growth will have to come from multiple models rather than driven by 1-2 models in Classic 350 or Bullet. Given the lower utilization, will the management be forced to adopt a strategy that is more push versus pull and would that result in margins reverting somewhat towards that of other OEMs? I believe if we see signs that margins will stabilize around 25%-27%, then I think valuations will start appearing good for long term buyers keeping in mind the positives related to balance sheet and promoters that you mentioned.
Would love to hear more thoughts.
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August 19 Sales:
Above 350 CC and Exports are showing excellent growth nos.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/c2bdb415-8845-4503-b903-b1ff602f5370.pdf
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Actually all the numbers have gone down in Aug-19 compared to July-19. So that’s a clear downtrend.
Upto 350 cc: July - 45041, Aug - 44694 (Drop of 1%)
Above 350 cc: July - 9144, Aug - 8210 (Drop of 10%)
Exports: July - 5003, Aug - 4152 (Drop of 17%)
ps: I am invested and looking to add more.
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Please consider one more point that after a particular year production of 2W and 3W internal combustion engine would be prohibited in India. Can you please help me with the years.
Thereafter who will buy Ev RE ??
I had a slightly different question - Are the Eicher bikes up to global standards nowadays? I tend to get multiple views, however the view from biking and car websites (like a team-bhp.com, motorcycleusa.com, xbhp.com) etc… is that there is still some catching up to do. I understand there is a huge fan following helped partly by the fact that these bikes are cheaper than comparable ones sold by other global players like a Yamaha, Triumph, Ducati or Harley.
The question than is - going forward how well can they manage their volumes. If they can they will continue to do well, else there will be pressure at current valuations.
Note: There is a growing trend in metros for young buyers to splurge on slightly expensive bikes. The primary purpose of that market is not to commute but to “wander”. That is a market that can buy expensive bikes and this market in my humble opinion will keep growing. It remains to be seen whether Eicher can continue to keep the lead.
Disc. Not invested and only tracking recently.
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Review and looks like a threat for the lower variants
Disc: No holding
This bike is good only for single person driving. Rear seating is so small that sudden acceleration will make him fall off.
Sep 19 Motor cycles sales data:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/cfc5a0da-a62d-45c3-a864-2eddb7a7a592.pdf
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Competitor for Classic 350?
I was going through the below link on India-US limited trade deal.
The US wants India to scrap/cut “not justified” tariff on ICT products (20%), motorcycles (50%), automobiles (60%) and alcoholic beverages (150%). The limited or interim trade agreement was expected to incorporate tariff-related concessions for US farm products, pricing of medical devices such as stents and knee implants and lower import duty on Harley Davidson motorcycles, in return for partial restoration of duty-free benefits for Indian exporters.
Once the price of Harley-Davidson is reduced there would be some hit on the sales of Royal Enfield. Would this deal have a negative impact on Royal Enfield (Eicher Motor) share in the near term?
According to this older article - https://economictimes.indiatimes.com/industry/auto/two-wheelers-three-wheelers/import-duty-has-nominal-impact-on-harley-davidson/articleshow/68415971.cms?from=mdr
Sajeev Rajasekharan, Harley-Davidson’s managing director for India, told ET that 13 of the 17 motorcycles in its lineup are assembled locally and, therefore, import duties have nominal impact on the company’s CBU operations in the country. India reduced import duties on CBUs to 50% and raised those on CKD (completely knocked down units) to 15% last year, which affected the company local assembly operations.
It will not reduce the prices of Harleys sold in India . So there should not be an impact on RE sales .
Re-initiating Coverage report by Nirmal Bang.
Eicher Motors-Re-Initiating Coverage - 9 October 2019.pdf (1.2 MB)
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Eicher website hasn’t updated motor cycle sales. Could you please provide the source?