Will continue to focus on mid-sized motorcycles: Eicher

After having tasted success with Royal Enfield's sales this year,  Eicher Motors is all gung ho on the launches they have lined up for 2015-18.

In an interview to CNBC-TV18, Siddhartha Lal, MD & CEO says the company has no ambition of getting into the big motorcycle segment and intends to focus on the mid-sized motorcycle business.

"We think that the market can grow not just in India but actually globally. So, instead of going in breadth in the product portfolio we are going in breadth in terms of geographies. We want to go into different markets and let other people experience our lovely motorcycle around the world," adds Lal.

Below is the edited transcript of the interview to CNBC-TV18.

Q: The sense that one has is that Eicher is going to be launching a new class form by the end of 2015. So what kind of launches can we expect which segments are you going to be launching new vehicles particularly bikes in and what is going to be the capacity of these new launches?

A: We had a great run over the last few years in Royal Enfield on the motorcycle side and we have now grown to about 30,000 motorcycles a month. We were doing that much in a year just a few years ago. So it's been a great run. It's been on a back of really nice motorcycles so we had a classic motorcycle in 2010 that was a first time that the new thunderbird in 2012 and the Continental GT in 2013 buts that all on the back of one platform. So, we have created a lot of scale on your existing platform.

We have new platforms in the works. We are going to see some lovely new motorcycles in 2015-2018. So there is an enormous pipeline of motorcycles but we are going to absolutely restrict ourselves to the mid-size motorcycle segment.

We have no ambition to make really big motorcycles or to make real commuter motorcycles. We are really focusing on the mid-size motorcycles and we are going to continue to do that because we think that the market can grow not just in India but actually globally. So, instead of going in breadth in the product portfolio we are going in breadth in terms of geographies. We want to go into different markets and let other people experience our lovely motorcycle around the world.

Q: Now that you now you are ramping per capacity so can one expect that the delivery timelines are going to come down?

A: That's all ready happened to some extent so on a denominator of around 10,000 motorcycles two years ago when we were making 10,000 per month we had waiting periods of 10-12 months that's over a 100-1,000 motorcycles. Now the waiting even our denominator increased to 30,000 a month and our waiting even though the absolute numbers of people on the waiting list have gone up the delivery period is between may be four and five months now so it has come down. We are adding a lot more capacity next year and the year after so that should further shrink the waiting period so hopefully within few weeks in a couple of years we should be able to get a motorcycle.

Q: During your last interaction you told us that you are targeting a 4, 00,000 sales target for FY15. Do you feel optimistic that you are going to be able to achieve this target or with the guidance have to come down and if I may ask you where does the sales figure stand as of now of Eicher Motors?

A: On the motorcycle side once again Royal Enfield in calendar year 2014 we are actually going to surpass our expectations. It was earlier 2, 50,000 then we upped it to 2, 80,000. We are going to certainly make and even probably cross 3, 00,000 now. For 2015 we have a plan of making 4, 00,000 but we are probably going to be 4, 00,000 plus. So it is going to be on the positive side not on the negative side where we are going in terms of our capacity and there is enough demand right now so we are not worried about that. We are doing lot of work to build the demand further because we have got more plans for new products and that's approximately where it is going.

Q: Given that sales are doing well pricing is that something that you are going to look at? One thing that makes analysts very optimistic is that you still have a lever as far as pricing is concerned that you can capitalise on. So, going forward can we expect Eicher Motors to increase prices? There are other companies who have indicated that in the coming years or months one can see a price rise?

A: The way we look at pricing, there is a temptation that when you have got a huge demand position that you raise prices a lot but that is not how we operate because our ambition is to create even more demand in the future. So, we don't gouge the market and as a result we out price eventually.

What we have been doing over the last few years is that we have been following the normal curve. So, there is a few percent increase a year, 2-3 percent a year that other manufacturers do. We have not been very far from that, we have probably been inline with that. However, what we have been able to do is that our margins and our extremely nice margins now which are closing in on 25 percent operating margins those are coming from the back of huge leverage that we have been able to create because of economies of scale. So, that is where our profitability is coming from.

In the future we expect as commodity prices increase a little bit we expect to marginally increase our prices but nothing substantially. You are not going to see big price hikes from us.

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