Fastest-Growing Emerging Companies Rank: 1
Group: STANDALONE COMPANIES
Segment: REVENUE Rs 3,000-6,000 CRORE

In the past four years, the motorcycles market has grown 4.5 per cent on average in terms of units sold. Siddhartha Lal-led Eicher Motors - makers of Royal Enfield motorcycles - has averaged 56.4 per cent. What has the company done different?

To start with, it has a big advantage - its 350-500cc cruiser motorcycles are unique in India. The market is dominated by staid, 100cc-thereabouts commuter bikes, and slightly bigger performance bikes, also called "sports" bikes. Royal Enfield bikes are heavier, have a vintage feel with a modern touch. And that ancient, guttural rat-a-tat-tat thump from the engine gives them a classy, retro feel.

More importantly, they have a ready, niche market that is yet democratic in customer profile. Buyers range from the regular - the driver of one of Lal's friends, for instance - to high-flying executives, motorcycling aficionados, adventure riders, college-goers. "Lal has created a niche of his own," says auto expert Tutu Dhawan, 63, a former national car rally champion, who is now in the business of restoring old automobiles. "For the first 30-40 years, Royal Enfield was an ordinary company. All credit goes to Siddhartha Lal for transforming it into an iconic, cult brand."

Consider this: Eicher Motors owns barely three per cent of India's motorcycles market. But the company almost completely dominates most segments it operates in. That has translated into hefty margins - operating profit margin of 28.04 per cent and net profit margin of 18.44 per cent in 2014/15. Compar- atively, market leader Hero MotoCorp, which has 53 per cent share in motorcycles, has margins of 14.07 per cent and 8.65 per cent, respectively (of course, Hero has several times Eicher's revenues).

It was not always like that. In 2002-2007, the motorcycles market was clipping at 18 per cent, while Eicher grew barely five-six per cent. Thereafter, Eicher sales started to perk up, even as the overall market slowed down.

FULL COVERAGE: India's Emerging Companies 2015The tipping point for Eicher came in 2010, after it launched the Classic motorcycle. But Lal had wrought significant changes before that to make the company more focused. "Over the decade before 2010, we put in a lot of effort in manufacturing, quality, parts availability, distribution, retail outlets, to bring them up to a decent level," says a relaxed Lal, 41, sipping coffee in the company-owned showroom at the upscale Khan Market in New Delhi. "We did a lot of rides and events and activities, so people started looking at the brand a little differently from, say, the 20th century where it was a nice brand, but for my uncle, not for me."

The brand, in a way, was completely overhauled, with focus on adventure and leisure riding. Eicher advertised practically only in auto magazines, and conducted several Royal Enfield riding events - The Himalayan Odyssey, Tour of Bhutan, Nepal and Tibet, Tour of Rajasthan and an annual festival, Rider Mania in Goa - that accentuated the "feel" of Royal Enfield as a stylish yet robust motorcycle that lasts the distance.

Discounts were done away with. The front end was overhauled - showrooms were made to look more like lifestyle retail outlets, selling bikes as well as Royal Enfield-branded clothing and accessories. Smarter sales staff was employed. A company spokesperson says these helped get more walk-ins and more bookings.

Going ahead, Lal will need to be busy at his day job to fend off rising competition. "If you look at Royal Enfield's growth, people (competitors) are looking at that segment," says Majeed. At the same time, he says Royal Enfield has been able to maintain its uniqueness, so competitors, too, need to bring in a unique proposition to compete.

Currently, Lal has no competition, but that could change. Harley-Davidson and Triumph, world leaders in cruiser bikes, have been doing well in India. Harley's sales climbed 140 per cent from the year before to 4,641 units in 2014/15. And Triumph grew almost 400 per cent to 1,326 units in the same period.

Significantly, in 2014/15, Harley sold more than 3,000 units of the 750cc Street, its smallest, cheapest (Rs 4 lakh plus), lowest-capacity bike. That is more than the 2,800-odd units clocked by the Royal Enfield cafe racer Continental GT, despite Street being twice as expensive. There has been speculation about Harley preparing a 500cc Street, but it could not be confirmed, as Harley-Davidson India declined to speak with Business Today for this story.

Dhawan, however, is confident of Royal Enfield's ability to match the big guns. "Royal Enfield's pricing, technology and availability of spares have improved vastly," says Dhawan. "They are much more competitive compared to Harley-Davidson and Triumph." He adds that unlike a Royal Enfield, you can't take a Harley or a Triumph to work every day. Plus, roadside mechanics can open up a Royal Enfield for impromptu repairs, which isn't possible with Harley or Triumph.

A power-packed challenger could emerge if Bajaj Auto, backed by its manufacturing prowess and huge distribution network, brings in a higher-calibre version of its 220cc cruiser, Avenger. The company, however, in a note to this magazine, declined to comment on this possibility, and said that it keeps launching new products from time to time and communicates about the same at the appropriate time.

Meanwhile, Hero MotoCorp has launched a cafe racer version of its highest selling motorcycle, the Splendor. A company spokesperson says today's youth are looking for stylish commuter and entry-level premium bikes that would also be inexpensive and give good fuel economy. The Splendor Pro Classic (Rs 50,000+) is tailored to that trend, and aimed at giving a taste of cafe racing to people who otherwise couldn't afford such motorcycles (albeit at 100cc it doesn't directly compete with Continental GT).

On his part, Lal is geared for battle. He expects to produce more than 450,000 motorcycles this year, compared to 336,000 last year. "Our order book is growing very fast," he says. "Visibility is increasing, saturation is extremely far away." Distribution is growing, too: the current 400 showrooms will go up to 500 by end-2015.

The company is developing two new platforms, though there are no plans for a hybrid model. "Every year over the next few years, we will launch at least one new motorcycle or platform," says Lal. He says he will stick to the 250cc-750cc segment. "I am expecting lots of competition," says Lal. "The market of 250cc+ will grow - who knows, three times, five times - in the next few years. If we can maintain our thought leadership over the years, we'll be fine."

Also, the overall motorcycles market is moving up at snail's pace, so what happens when the market takes off? Dhawan thinks Eicher's sales won't be affected simply because of the uniqueness of its products. On its part, Eicher says that in developing countries, a significant number of young consumers owning 100-150cc bikes are keen to move up to products that are more fun to ride, products that the company offers.

Even as competition increases in India, Eicher is also betting big on exports. The US, UK and Europe are big focus areas, because Lal believes there are customers there who want to move away from the existing offerings of extremely heavy and powerful machines, to the middle-weight, leisurely Royal Enfields. It will target Latin America in a big way in future - it has already entered Colombia - and Southeast Asia. So far, the company's strategy seems to have worked well, with exports climbing 45 per cent in 2014/15 to 7,115 units. "We sold more than 1,000 bikes in the US last year," says Lal. His avowed aim is to dominate the mid-sized motorcycle market worldwide.

The bigger challenge would be to continue to stay true to customer aspirations. A Tutu Dhawan would want nothing to change: "If I were Siddhartha Lal, I would go on. When you are getting money out of peanuts, why should you invest megabucks?" An Abdul Majeed, on the other hand, would want some changes: "Royal Enfield should not become complacent. They need to look at alternative fuels. They need to think through on the technology front also. In three-four years, the customer will not be the same." A prospective buyer, Maninder Singh Bhandari, 28, a gym trainer in Delhi and a fan of Royal Enfield, has decided to buy a pre-2010 second-hand Bullet because his friends, many of who drive Royal Enfields, have advised him that the new bikes are bakwaas (useless).

Admittedly, you can't please everyone, but Lal says he is guarding against complacency. "Complacency concerns me; it's one of the pitfalls of success," he says. "But right now, the flavour in the team is not of relaxation. There is a fire burning in terms of improvements."

Motorcycle aficionados will hope the fire keeps burning.