Markets
Chart Beat: Will Royal Enfield lose its market clutch?
Summary
- New launches would aid in category expansion, but rising competition would offset this benefit
Eicher Motors Ltd’s Royal Enfield is likely to see a drop in its market share in the coming months. True, the company is launching new vehicles, but so are its peers. New launches would aid in category expansion, which augurs well for Royal Enfield. But, rising competition would offset this benefit. Peers–Bajaj Auto Ltd and Hero MotoCorp Ltd– have launched premium vehicles in collaboration with Triumph Motorcycles and Harley Davidson, respectively.
“We expect the above 250cc domestic industry to grow by high single-digit compound annual growth rate over the medium term, but Royal Enfield to underperform the industry growth owing to elevated competitive intensity," said analysts at Kotak Institutional Equities in a report on 4 March. The broking firm expects Royal Enfield’s market share to drop to 78% over the medium term.
Moreover, the company’s recent launches have been in the above 350cc segment – Himalayan 450 and Shotgun 650. Sure, the ongoing premiumization trend is positive. But Kotak believes that this may not move the needle on volume growth for Royal Enfield in a big way due to its niche positioning and lower propensity of consumers shifting to above 350cc segment from the 250-350cc.
