Every Indian’s bike
Royal Enfield is all set to showcase its flagship 650 cc, twin cylinder bike at the upcoming Milan Motorcycle Show. Royal Enfield is easily one of the biggest brands from India and has broken records in selling its motorcyles in India and abroad. But this wasn’t the case some 17 years ago.
The rise and rise of Royal Enfield
Consider this: If you had spent Rs 55,000 to buy a Royal Enfield motorcycle in 2001, you would now have an old, rugged bike. But if you had invested the same Rs 55,000 in shares of Eicher Motors, the company that makes Enfield bikes, your investment will be worth Rs 3.53 crore now. The stock has skyrocketed 64,146 per cent to Rs 31,320-odd level on November 6 from Rs 48.75 as on January 3, 2000.
￼Enter Siddhartha Lal
The twin credit for building a rugged bike as well as enormous value for shareholders goes to Siddhartha Lal, MD and CEO, Eicher Motors. In some ways, it all came to one big decision Lal took based on his love for Enfield. It was 2004 and Lal was 30 and had just taken over as COO of Eicher group. The group had a diverse spread of about 15 businesses including tractors, trucks, motorcycles, components, footwear and garments, but none was a market leader.
￼Taking a hard call
Lal decided to divest 13 businesses and put all money and focus behind Royal Enfield and trucks, two businesses where he believed the group had a genuine shot at leadership. “In my mind the basic question was this: do we want to be a mediocre player in 15 small businesses or just be good in one or two businesses,” recalls Lal.
￼Lal’s pet business
“I did the mathematics, projections and all we needed was to get the motorcycle business to the next level (in terms of sales).”
Decision made, Lal put his full weight behind Royal Enfield and the trucks business. A decade later, Eicher Motors earns over Rs 8,738 crore in revenues and makes a net profit of Rs 702 crore (FY14). Royal Enfield brings in about 80% of these profits.
￼The long climb up
In 2005, the company was selling only about 25,000 bikes every year. “I was clear that it would be an amazingly profitable business,” recalls Lal. But the company needed manufacturing scale. Fixed cost had to be spread around 100,000 bikes.
He focussed on Enfield first, leaving trucks for later. Lal engineered and improved Enfield bikes by riding hundreds of kilometres himself. He also initiated a motorcycling culture in the team. Ravichandran says Lal always leads from the front.
￼Sales shoot up
Under Lal, as quality improved, sales grew too. By 2010, the company was selling 50,000 bikes, but on three platforms. That was when Lal decided to build all Enfield bikes on a single platform to maximise economies of scale. The Enfield Classic, launched from this single platform, caught the fancy of customers. Sales shot up six times in half a decade from 50,000 units in CY10 to 589,293 in CY14.
￼Inspiration from global brands
Lal draws inspiration from global brands. Two of the most studied examples are the Mini Cooper and Porsche, both of which are very focussed and conscious about not diluting core DNA.
When Lal was a student in the 1990s in the UK, small cars were poorly designed when compared to the mid-size and larger cars. Then came the Mini, which changed the paradigm and made small cars really fun to drive. “That’s what I want from Royal Enfield — to make mid-weight motorcycles fun to drive, yet retain its DNA,” he says.
Royal Enfield exports jumped by 97.6 per cent to 1,478 units as against 748 units from the same month last year. Lal believes Royal Enfield can be a sizeable player in international markets a decade from now. That is why did some strategic hiring with this goal in mind.
￼Right people at the right places
Rod Copes, a former Harley Davidson manager has been hired as president of North America (based in US); Pierre Terblanche, head of the industrial design team was snagged from Ducati; James Young, head — engines has worked in Triumph, and was hired in UK. Simon Warburton, head — product planning and strategy (new projects) also comes from Triumph.
Mark Wells, head — programme (new projects) and Ian Wride, worked on Enfield’s Classic and Continental GT models while they were with the design firm ‘Xenophya.’ Both have now joined Royal Enfield at its UK tech centre. Lal also realises that good marketing is as important as fine engineering. Which is why he recently hired Rudratej Singh from consumer business giant Unilever. Singh joined as president in January 2015.