What’s the Bullet without its signature thump? Eicher Motors — the parent company of the maker of iconic Royal Enfield motorcycles — has earmarked Rs 1,000 crore as capital expenditure for the year ending March 2024 on areas including the product development and manufacturing of electric vehicles.

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Eicher Motors' bold step towards going electric has left one question doing rounds in the minds of Royal Enfield customers — including those banking on innovation by the reliable cult motorcycle manufacturer and those committed to being loyal to the original look and feel of the age-old Bullet: What will an electric avatar of the traditionally loud and rumbling machine look like? What will it sound like? How quiet will it be?

Remember, Royal Enfield is best known for having carried forward the age-old heritage of the legendary Bullet motorcycles — the longest-living motorcycle design in history.

So, what's Royal Enfield up to? What can the average motorcycle enthusiast and the investor expect?

"You can expect something different, pathbreaking and fantastic from us by 2025," Royal Enfield told Zeebiz.com, asked when the motorcycle maker plans to roll out its first electric vehicle.

"We are progressing on our EV journey and have several ideas that are already in advanced stages of testing. Our approach toward our electro-mobility journey is very different and we have spent the last two years understanding the market and trends," Royal Enfield said.

"We are now in investment and execution mode and are establishing our supply chain. We are aggressively building our EV technology and are working towards creating a differentiated motorcycle that will have a global appeal. With our strategic investment of 50 million euro in Stark Future, we have made considerable progress on our EV journey," the motorcycle maker added.

In December 2022, Royal Enfield parent Eicher Motors announced the acquisition of a 10.35 per cent stake in Spanish electric motorcycle maker Stark Future for 50 million euro (Rs 442.9 crore at 1 euro = Rs 88.57), part of a strategic collaboration in the EV motorcycle segment.

What else is Royal Enfield doing?

The motorcycle maker — whose popular models include the Classic 350, the Himalayan, the Hunter 350 and the Interceptor 650 — also told Zeebiz.com it is building "a strong team internally and bringing in the right kind of talent".

"We have built a highly capable team with EV specialists who are working on the technology, business, and customer aspects in the segment," Royal Enfield said.

Royal Enfield is thinking electric: A risky game or a gamechanger?

Royal Enfield appears to have more than cracked the code in the typically mileage-conscious domestic market, as reflected in its record annual sales for the year ended March 2023.

The motorcycle maker sold 8,34,895 vehicles in the financial year 2022-23, marking a 38.4 per cent increase compared with the previous year, and far-outshining its previous best yearly performance in 2018-19.

The company owes its success in the sub-350 cubic capacity segment to the Classic 350. Launched in 2008, the motorbike today is the company's top-selling model. Its roll-out marked the first time in more than 50 years the legendary signature motorcycle got a major revamp.

Eicher Motors — which earns the lion's share of its revenue from Royal Enfield — clocked a 73.8 per cent jump in net profit to Rs 2,913.9 crore for the year ended March 2023 compared with the previous year, driven by 40 per cent growth in revenue to Rs 14,175.9 crore, according to a regulatory filing.

For the final quarter of the year, the company staged a strong performance on all parameters, with an 80 basis-point improvement in margin — a key measure of profitability for a business.

Metric Q4 FY23 Q4 FY22 Zee Business estimate
PAT Rs 906 crore Rs 610 crore Rs 800 crore
EBITDA Rs 934 crore Rs 757 crore Rs 880 crore
Revenue Rs 3,804 crore Rs 3,193 crore Rs 3,700 crore
Margin 24.5% 23.7% 24.3%

The launch of Classic 350 was an inflection point: Royal Enfield

In September 2021, Royal Enfield launched an all-new version of the Classic 350 motorcycle.

Since the success of its breakthrough Classic 350, Royal Enfield has continuously made it a point to innovate.

In May 2023, Royal Enfield CEO B Govindarajan mentioned a strong lineup of motorcycles planned for 2024. On an earnings call, he said: "At Royal Enfield, we had a very great year, but I must tell you, we have also an even better one, which is planned, which we will see in time to come."

Speaking on the company's just-begun EV journey, he said the company had been making steady progress. "I can say EV journey Royal Enfield is in the top gear now. Our intention is to create uniquely differentiated electric motorcycles with strong Royal Enfield DNA."

What does the customer make of Royal Enfield's DNA?

Most of the Royal Enfield customers that Zeebiz.com spoke to acknowledge the company's rapidly evolving designs and innovation capabilities, as reflected in its products, as well as a distinct divide between the customer base, which also includes those leaning towards the traditional look and feel of the iconic motorbikes.

Today, Royal Enfield has nine models, starting at about Rs 1.6 lakh and going as high as Rs 3.5 lakh (ex-showroom Chennai), targeting a wide array of customers.

Royal Enfield price list (ex-showroom Chennai)

  • Royal Enfield Bullet (Black): Rs 1,60,178
  • Royal Enfield Himalayan (Gravel Grey): Rs 2,15,900
  • Royal Enfield Continental GT (GT Red): Rs 3,18,999
  • Royal Enfield Interceptor (Cali Green): Rs 3,03,000
  • Royal Enfield Meteor 350 (Red, Yellow, Matt Green, Blue): Rs 2,04,408
  • Royal Enfield Classic 350 (Sage Green, Grey, Red SC): Rs 1,93,080
  • Royal Enfield Scram 411 (Graphite Yellow, Red, Blue): Rs 2,06,394
  • Royal Enfield Hunter 350 (Factory Black, Silver): Rs 1,49,900
  • Royal Enfield Super Meteor 650 (Astral Black, Blue, Green): Rs 3,54,398

Siddharth, a Pune-based digital marketing executive, prefers the newer Royal Enfield motorcycles to its other models, citing "the sophistication (comfort and gadgetry) and technological advancement in the engines and chassis that make them smoother and better to ride and handle".

"There is one type of customer, who has that traditional look and fee engraved on their mind, and the new age customer, who is getting attracted to the brand due to the above-mentioned reasons," said Siddharth, who owns a Hunter 350.

Royal Enfield continues to enjoy strong demand for its range of motorcycles driven in part by its long-term brand appeal.

"There is a strong sense of nostalgia around the older (motor)bikes... Sometimes it is just this that makes a customer spend heavily on restoring a pre-owned Royal Enfield," said Dharmendra, a New Delhi-based self-employed mechanic, who has been servicing Royal Enfield motorcycles for more than two decades.

"Older motorcycles are just as easy to repair given the wide availability of (spare) parts," he added.

What's in it for investors?

Although most analysts believe it is too early to estimate the contribution of Royal Enfield's EV drive to its overall business, some say it is important for automakers across major segments to adapt and be ready for the country's move towards electric and hybrid vehicles.

The government aims to take domestic EV sales to capture the market of 80 per cent of two and three-wheelers by 2030, as part of its push towards greener mobility solutions.

"We do not think more than Rs 400 crore out of that Rs 1,000 crore (capex) would be for EVs. Anyways the EV development is an activity company is doing in advance to get prepared for EV launches if needed in the premium biking space. With Ultraviolette, Ola Electric, Revolt, Tork etc. getting ready with good EV premium bikes, RE is also getting prepared to face competition in the premium biking space under EVs," Basudeb Banerjee, Analyst-Auto at ICICI Securities, told Zeebiz.com.

ICICI Securities recently downgraded Eicher to 'add' from 'buy' citing the likelihood of limited upside in the stock price.

"An EV launch by RE would just be an experimental aspect... It needs to get scaled up to make commercial viability when the acceptance of EV premium motorbikes at the price levels of Rs 3 lakh increases... Till then, it is inconsequential from both positive and negative sides," the analyst added.

Eicher Motors: An investment opportunity to play the EV theme?

Here's what some of the top brokerages make of Eicher Motors:

Brokerage Rating Target (in rupees per share) Upside/downside as of May 30 (%)
Goldman Sachs  Buy 3,990 8.5
CLSA Buy 4,266 16
JP Morgan  Neutral 3,620 -1.6
Jefferies Buy 4,000 8.8
Citi Buy 4,800 30.5
Morgan Stanley  Equal-weight 3,553 -3.4
Axis Securities Buy 3,900 6.1
ICICI Securities Add 3,953 7.5
HDFC Securities Add 3,715 1

As of May 29, Eicher Motors shares grew 14 per cent in value in 2023 so far, a period in which the Nifty benchmark index rose 2.9 per cent and the Nifty Auto sectoral gauge 12.7 per cent.

Stocks of manufacturers of automobiles and related parts hold a weightage of 5.5 per cent in the blue-chip index.