Royal Enfield’s profit margin races past Harley’s

For long the global automotive industry has admired Indian manufacturing: for its frugality. Now there is one more reason: profitability.

For long the global automotive industry has admired Indian manufacturing: for its frugality. Now there is one more reason: profitability.

India’s Royal Enfield (RE)is now more profitable than iconic US superbike maker Harley Davidson. And it is an apples-to-apples comparison because both are niche market players highly valued by the markets.

RE declared an operating margin for the quarter ended June at 24.4%, which was better than Harley Davidson’s 23.1% for the same period.

RE is also ahead of Harley on sales, at 106,613 units in the quarter, 44% over last year, while the US firm’s sales dipped 1.4% to 88,931.

However, Harley’s revenues were still much higher at Rs 10,230 crore compared to Royal Enfield’s Rs 1,096.8 crore, owing to their pricier bikes and robust merchandise and accessory business.

The Indian company has also recently forayed into merchandising, which commands a higher margin, but the impact of this is likely to figure only by the end of this fiscal.

The two are not by any means direct competitors either in India or globally, since they are in totally different price segments: Enfield’s bikes cost between Rs 1.0-2.2 lakh, while the cheapest Harley costs Rs 4.5 lakh.

Yet, Enfield makes no bones about its global aspirations, while Harley is only now looking at affordable bikes — which may bring them on a collision course.

Siddhartha Lal, MD and CEO of Eicher Motors, would himself be relocating to UK, closer to Enfield’s technical centre, for a year. “We are in the process of developing engines for the international markets and lots of work is happening in the UK,” Lal said. “Apart from US, UK and Europe, we are looking to enter Latin America and South East Asia.”