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Open to strategic partnerships, says Royal Enfield's new CEO Vinod Dasari

For the first time, Royal Enfield, India's market leader in the middle-weight motorcycle segment has said that it is open to strategic partnerships and acquisitions.

For the first time, Royal Enfield, India's market leader in the middle-weight motorcycle segment has said that it is open to strategic partnerships and acquisitions.
Speaking exclusively to CNBC-TV, the company's new chief executive officer (CEO) Vinod Dasari said the company was open to strategic partnerships and acquisitions that give it technology, territory and talent. "We are looking for acquisitions and partners that give us the three T's, talent, tech and territory but we are not desperate about it either," he said.
Dasari's comments assume importance at a time when the iconic Royal Enfield brand is embarking on an ambitious 2.0 plan. The plan includes leveraging digitisation, electrification, shared mobility and cementing Royal Enfield's position as a global middle-weight motorcycle maker.
In his first interview after taking over as CEO earlier this year, 53-year-old Dasari also laid out Royal Enfield's plans for electric vehicles. He said, "Royal Enfield's UK tech centre had rigged up an existing product into an electric motorcycle and it's fantastic, I have driven it myself."
Sources have told CNBC-TV18 that Royal Enfield has been testing an electric Himalayan in the UK. Dasari said he is not in a hurry to launch an electric vehicle (EV) and would prefer following market developments.
"Not in a hurry with EVs, may take two to three years to launch one but want to get it right. Looking to maintain the Royal Enfield DNA in the electric segment. Who knows you may have a retro-styled electric Royal Enfield", he said.
Royal Enfield, like other OEM's, has been witnessing a slowdown for over a year now. If unit sales increased by 153,986 in 2017-18, the number fell to just 2,603 units in 2018-19.
Dasari admitted that maintaining a 9.2 percent revenue growth rate would be a challenge, but he also saw the downturn as a blessing in disguise. "We have a comprehensive strategy for the next five to six years. Looking to bring one new product or variant every quarter. We are also introducing new rides to support causes and hobbies," he said.
In addition to the 900 plus showrooms, Royal Enfield has added over 500 studio stores across the country. Dasari said that these studio stores had been a huge success with 90 percent of the stores turning profitable within two months of the launch. He emphasised that the small-format stores have helped to increase the brands reach both in terms of sales and service centres.
Royal Enfield has also started working on a 'Made to Order' plan in order to change the way dealerships work. Dasari said that as a result of the slowdown, the company's manufacturing plants were running at 50-60 percent capacity and the temporary workforce has been trimmed as well.
As a result of these efforts, the brand has been able to reduce inventory to less than three weeks, he claimed. "Royal Enfield has just launched its Make Your Own application where a customer can customise his motorcycle. We are moving towards made to order from make to stock in order to reduce inventory", he said.
The middle-weight motorcycle maker has seen a healthy export growth driven by the Continental GT650 and the Interceptor 650. Royal Enfield's exports grew 161 percent in Q2, albeit on a lower base.
"We are selling 500 bikes in North America every month, selling 2,000 bikes in Europe, expanding in ASEAN nations. Looking to set up more CKD plants globally at an investment of a million dollars or more," said Vinod Dasari. The company's assembly unit in Thailand will begin functioning soon and a plan to introduce studio stores there is also being explored, he said.
The industry veteran, who has transitioned from commercial vehicles to motorcycles said that Royal Enfield was fully ready for the BS-VI transition and the twins had given them the confidence to explore future products with the same 650cc engine.
Royal Enfield, as part of its ten-year goals is focusing on enhancing customer experience through digitisation and also shared mobility. "We are exploring the possibility of connecting the bullet's ECU with your mobile phone", he said. He also added that the slowdown has not impacted Royal Enfield's 700 crore capex plans for FY20 and the company today has a capacity of manufacturing a million vehicles.