Royal Enfield

Royal Enfield – Brand Rejuvenation of Motorcycle in India The year 2000 could have been decisive. That was when the board of directors at Eicher Motors decided to either shut down or sell off Royal Enfield - the company's Chennai-based motorcycle division, which manufactured the iconic Bullet motorbikes.

For all its reputation, the sales of the bike was down to 2,000 units a month against the plant's installed capacity of 6,000; losses had been mounting for years. Just one person stood up to the board, insisting Royal Enfield should get another chance. He was Siddhartha Lal, a third generation member of the Delhi-based Lal family, promoters of the Eicher group of companies. Lal, then 26, was an unabashed Bullet fan: he even rode a red coloured Bullet while leading the baraat (procession) to his wedding venue, instead of the traditional horse.

"The board agreed to give me a chance," says Lal. "It was not because of its confidence in me, but because the business was doing so badly it could hardly get any worse." Lal felt Royal Enfield could still be saved. The bike had its reputation, a cult following, an instantly recognisable build, and aspirational value. Changes had to be made to keep up with the times and make the bike more acceptable, and there in lay the problem.

Royal Enfield fans liked the bikes exactly the way they had always been. "We needed changes to attract new customers but by doing so risked losing existing ones," says R.L. Ravichandran, whom Lal brought in as CEO in 2005 as part of his revival effort. Ravichandran had earlier worked with both TVS Motor and Bajaj Auto. "We were in a peculiar situation," he adds. Rejuvenating Times The change had to be a calibrated one.

The mistaken notions of prospective customers had to be addressed, and any reservations about Bullet and Thunderbird, which was launched in 2002, removed. At the same time, Lal and Ravichandran were clear that the individuality of Royal Enfield bikes should not be compromised. "We did not want to go down the commuter route, but instead looked at the leisure segment," says Ravichandran. Retaining the bikes' rugged looks was a given, including the build, the design of the head lamp and the petrol tank. But should the gears be shifted close to the rider's left foot - as in most bikes - or retained on the right side? The question gave Lal and his team many sleepless nights, since long time users were dead opposed to the change. The engine was another thorny question.

The old cast iron engine was a relic of the past. Its separate gear box and oil sump design made it prone to oil leaks and it seized up very often. Its ability to meet increasingly strict emission norms was also suspect. A modern aluminium engine would eliminate these problems, but it would lack the old engine's pronounced vibrations and beat - which Royal Enfield customers loved.

Laws of physics made it impossible to replicate these with the new engine. The new engine had 30 per cent fewer parts and produced 30 per cent more power than the old, with better fuel efficiency. By 2010, all Royal Enfield models had begun to use the new engine. Two other problems needed to be addressed: the quality of some of the components Royal Enfield bikes were using, and the sales experience. The case is prepared by Prof. Sanjay Patro and Aby Abraham, XLRI Jamshedpur for academic purpose only. It is not to illustrate either effective or ineffective handling of a business situation

To tackle the first, shop floor process were fine e ses e-tuned, whil suppliers w exhorte to le were ed improve qua ality levels. R Royal Enfield also embar d rked on a larg scale inter exercise to tone ge rnal e up performa ance. "We de eclared 2006 as the year o getting bac to the bas of ck sics," says Ravichandra "We also formed a fie quality ra an. eld apid action fo to bridg the gap bet orce ge tween customer expectations an the reality nd y."

Slowly, the tide turned. E t Engine relate problems and oil leaka ed ages in the b bikes were tackled first. By 2008 de ealers were reporting lo ower worklo oads in the workshops. Warranty c claims fell sharply too. Royal Enfi ield also beg conduct gan ting marquee rides to promote leisu biking. e ure "Such steps removed the fears abou our produc reliability some customers may h ut cts' y have had," says Venki Padmanabh han, who su ucceeded R Ravichandran as CEO e n earlier this year after Ravichandra was eleva an ated to the b board of Eich Motors. To improve sales exper her e rience new expanded. company-ow wned sho owrooms were la aunched and dea alerships

In October 2008, Roya Enfield lau al unched in G Germany its newly desig gned 500cc Classic mod - inspire by J2, a del ed 1950 model Bullet - wit the new engine. It was a success, th admired fo its pe for erformance and fuel economy. Emboldened Lal launch it in In d, hed ndia in Nove ember 2009 initially as a 350 cc b bike, priced at Rs 1.20 lakh. This proved a hit too. "Now, our capacit utilisation is 100 per t , ty n cent.

Yet there is a six month waiting period for hs deliveries,'' says Venk "We pla to doub our cap ki. an ble pacity soon to 1.5 lak bikes." kh Changing T Times According to industry body, the Soc ciety of India Automob Manufac an bile cturers, the In ndian twost l e wheeler industry is expected to pos an annual growth of 11-12 per cent, and the market is expected to double ever four years till 2020. A ry s According to data from Nomura and Crisil, as o d 0 wo-wheelers were sold in India 20 011-12.

Vehi icles in the executive many as 10 million tw segment form the bulk of sales at 6.5 million, f med k 6 followed by the economy segment (1.8 million) y and premium segment (1 million). m 1.7 The recent series of hike in the price of petrol h s es have played a significant role in the sa of twoale wheelers, ac ccording to S SIAM, as mo first-time four-wheel buyers in rural India and tier II ost e ler n and tier III c cities have d deferred their purchases.

Two-wheelers account for a very h high 76 per cent of mar rket share in the autom n mobile sector in Asia’s third-largest economy. Passenger r t vehicles account for 16.2 per cent. 25 According to a recent H t Human Deve elopment Re eport by UN NDP, India i one of the youngest is e nations with the median age being 29 yrs by the year 2020. A the pene h And etration figur of 35% res Urban and 1 14% rural in ndicates that there going to be a per g riod of grow in the tw wheeler wth wo market.

Challenging Times g The compet tition in high 'cc' two wheeler seg her gment is heat ting up. Bajaj (Pulsar 35 NS, Rs 50 1.75 lakh), Yamaha (Sp ports bike F FZ1, a 998cc motorcycle, at a price tag of Rs 8.7 lakh), c e Kawasaki N Ninja 650, etc are burning the rubber t enthrall In c g to ndian youths. 2

Rajiv Bajaj, Managing Director of Bajaj Auto, the 2nd Largest Motor cycle manufacturing Company of India, said “We have recognized the different needs of the customers of our high end bikes. To cater to these needs we have established separate stores called as "Bajaj Probiking Showrooms at in the major cities across the country. The Kawasaki Bajaj Ninja is available exclusively through Probiking Showrooms.”

Bajaj has joined hands with KTM of Austria a bike manufacturer since 1934 and has brought higher end motorcycles in India under the brand KTM Duke. Hero Moto Corp after separation of its ties with Honda has become more aggressive. Honda charting out its solo journey wants to bring the best of the world to one of the fasted growing market of India. These are the few competitors to name.

Many more will follow. Entry of Harley Davidson into India added new flavour to the higher end segment. HarleyDavidson India commenced operations in August 2009 and appointed the first dealership in July 2010. Since early 2011, Harley-Davidson has been assembling motorcycles in India at its CKD (Completely-Knocked-Down) assembly unit at Bawal in Haryana.

India is the second country where Harley-Davidson has CKD assembly operations outside the US, after Brazil. Harley-Davidson currently offers a range of 14 models from each of its 5 families – Sportster, Dyna, Softail, V-Rod and Touring. Each of the five Harley-Davidson motorcycle families boasts of a distinct character and caters to the varied sensibilities of the broad range of customers. Road Ahead Siddharth Lal observed that it grew at 42% and could sell 74,626 bikes during the year 2011.

Venki is excited about the fact that demand has more than doubled and Enfield can supply and he is not bothered about the market share figures as they see themselves in a different league. In his words 'it is more about the context of the product”, the product-market '. "Royal Enfield is a leisure brand that it enables customer to enjoy leisure". "It is an involving and engaging motor cycle" . The bike demands for continued caring kind of interaction from its riders that leads them to develop a emotional bond. Today, Royal Enfield's problems are of a different kind. It needs to scale up without diluting brand equity.

From being the most expensive bike on Indian roads, today it faces challenges from iconic global brands such as Harley-Davidson which has entered the Indian market. With other competitors getting battle ready,how can it hold on to customers through the waiting period of six to eight months.

Driving change when the chips are down is easy, when there is no other option. In Royal Enfield's case the? What would be your recommendations to Mr. Venki Padmamnabhan, CEO, with regard to its future roadmap, Product strategy, Brand Management /engagement and Marketing strategy?

Exhibit 1 Production figures for 2012 Jan-12 Hero Motocorp Ltd. 458848 7303 Royal Enfield 76 Harley David's Feb-12 479927 8005 116 Mar-12 502208 9004 104 Apr-12 485325 9013 104 May-12 515627 9256 100 Jun-12 517848 9265 74 Jul-12 469951 10057 90 Aug-12 401194 10237 86 Sep-12 367869 10255 87 Oct-12 426307 10606 78

Exhibit 2 Harley Davidson Bikes Price list India Harley Davidson Super Low Price In India : 5.5 lakh Harley Davidson IRON 883 Price In India : 6.5 lakh Harley Davidson 883 Roadster Price in India : 7.5 lakh Harley Davidson Forty-Eight Price In India : 8.5 lakh Harley Davidson Nightster Price In India : 9.95 lakh Harley Davidson XR1200x Price In India : 11.95 lakh Harley Davidson Street bob Price In India : 13.95 lakh Harley Davidson Super Glide Custom Price In India : 15.45 lakh Harley Davidson Fat Boy Price In India : 19.2 lakh Harley Davidson FLSTFB Fat boy Special Price In India : 19.7 lakh Harley Davidson Haritage softail classic Price In India : 20.2

lakh Harley Davidson Night ROD Special Price In India : 19.55 lakh Harley Davidson Road king Price In India : 22.45 lakh Harley Davidson Street glide Price In India : 24.2 lakh Harley Davidson CVO ultra classic electra glide Price : 34.95 lakh Exhibit 3 Royal Enfield Bikes Price List in India 2012 :

Royal Enfield Classic Chrome – 1,67,000 Royal Enfield Desert Storm – 1,57,000 Royal Enfield Electra 5 S – 69,000 Royal Enfield Bullet 500 Classic 1,23,000 Royal Enfield Thunderbird K.S. 89,000 Royal Enfield Bullet 350 ES – 85,600 Royal Enfield Machismo 350 – 78,000 Royal Enfield Electra 4 S – 93,100 Royal Enfield Machismo 500 – 1,04,000 Royal Enfield Thunderbird S. S – 1,07,000 Royal Enfield Bullet 350 UCE – Rs. 99,500 Royal Enfield Electra Twinspark ES – Rs. 1,11,000 Royal Enfield Electra Twinspark KS – Rs. 1,07,000 Royal Enfield Thunderbird Twinspark – Rs. 1,16,000 Royal Enfield Thunderbird 500 – Rs. 1,66,000

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-2: l Exhibit- Bajaj: Driving the Power Revolution with Pulsar

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Exhibit: 3: Harley Davidson’s Advertisements in india t

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