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Bajaj Auto to ready a Royal Enfield rival
Posted on 4th April 2016
Royal Enfield's dominance in the middle-weight motorcycle category might soon have competition from Bajaj Auto.

According to Bajaj Auto, the third largest two-wheeler manufacturer in the country, the 350-600cc motorcycle market Royal Enfield operates in has enough room for more players to come in. When asked if Bajaj Auto would get into this space, Rajiv Bajaj, managing director, Bajaj Auto, said, "Definitely. Every mature segment becomes a two-horse race eventually in any given market. The entire market is monopolised today by one person.... there is room for a second person. We can create a brand for that space. I am sure everyone else is thinking about it. The success of Royal Enfield is not lost out on anyone."

Eicher Motors-owned Royal Enfield sold 600,000 units in FY16 growing at 52 per cent compared to FY15. This come, at a time, when the rest of the two-wheeler pack led by Hero MotoCorp struggled to beat FY15 sales owing to subdued demand from rural markets.

Robust demand has forced Royal Enfield to expand capacity six times from 100,000 units a year in 2012, even as the current waiting period on its models stretches to up to six months. The company is installing its third plant on the outskirts of Chennai, which will take its installed capacity to 900,000 a year by 2018.

"Typically, a lot of people buy the leader," said Bajaj, adding there are many takers for the competing brand as well. "Harley (Davidson) is about 400 bikes a month, but Royal Enfield has created a huge space for itself in the 350-500cc segment. I'm sure there are at least six manufacturers who are asking themselves 'what should we do about it'. There is chance, in my opinion, for only one."

Although it has a limited line-up, Royal Enfield is present in leisure, cruise, touring and sports segments under different well entrenched brands such as Classic, Thunderbird, Bullet and Continental GT. While Bajaj also has established brands like Pulsar (sports) and Avenger (cruise), a new brand might get created, considering the price position and product offering of Royal Enfield, whose model's average price is around Rs 1.5 lakh.

On whether brand Avenger would be capable of steering Bajaj Auto's entry into the segment, Bajaj said, "It could be. But, would a fellow buying a Royal Enfield 350-500 consider a brand like Avenger suitable when he sees lots of people on Avenger 150? I'm not sure. I would not say no, but I'm not fully convinced that's the best way. I'm not sure if an Avenger can impart the same charm as, say, a Royal Enfield."

However, getting into the segment will be a challenge for not just Bajaj Auto but everyone, given the brand legacy created by Eicher Motors managing director Siddhartha Lal. "The two-wheeler sector is about brand. It is not going to be easy for anyone to steal volumes from Enfield. We saw what happened to the Dream series of Honda and to the Discover series of Bajaj - both in the economy segment. Pulsar has been so strong in its segment that no competition has affected it," said a Mumbai-based analyst.

"It is inevitable that other people will enter the space. We're not the brand that claims to be everything for everybody. We are the only chaps in the middle-weight motorcycle (segment) in India. While we have done 50,000 bikes a month, none has done even 1,200. We have a totally different scale and cost structure and we have a very different brand positioning. We'll continue to maintain a very strong and leadership position in 250cc and above," said Lal. Riding high on the recent success of a differentiated product, V15, in the 150cc category, Bajaj feels it can compete effectively with Royal Enfield.

"The reality is that Eicher, led by Siddhartha Lal, has breathed new life into Royal Enfield, in product and marketing terms... There's only one way to compete with Enfield or with any other strong brand for that matter - develop a differentiated alternative that creates its own category by repositioning the incumbent," said Bajaj.

Related Companies: Bajaj Auto Limited   

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