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Royal Enfield to double capacity in two years

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Royal Enfield, the Chennai-based cult bike maker, is planning to more than double its production capacity over the next 18-24 months to cater to the surging demand.

Owned by New Delhi-based Eicher Motors it aims to increase its production capacity to 12,000-15,000 units per month from 5,000 units per month.

Siddhartha Lal, managing director and chief executive officer of Eicher Motors, said, “We are evaluating various ways to increase our production capacity. Over the next 18-24 months, we should be able to bring the new capacity on stream.”

Lal declined to comment on the proposed investment for capacity addition, but industry experts said it would cost the company a minimum of Rs 200 crore.

Now, Royal Enfield produces five models at its Chennai facility. According to Lal, the company is witnessing good traction for its newest range, including Classic 350 and 500, which cost more than Rs 1,00,000.

“We had to adjust the bike capacity marginally to accommodate the Classic range and hence, the monthly capacity had dipped to 4,500 per month, which is now back to 5,000-levels. By next year, this capacity should reach 6,000 units per month,” said Lal.

VE Commercial Vehicles (VECV), a 50:50 joint venture between Volvo Group and Eicher Motors, will invest Rs 800 crore for capital expenditure and setting up an engine manufacturing facility over the next three years.

The company is setting up a facility at its existing plant at Pithampur, Madhya Pradesh, for manufacturing advanced truck and bus engines for Volvo. The facility would be operational by the start of 2013.

VECV aims to increase its market share to 15 per cent, from 2-3 per cent, by 2015 in the heavy commercial vehicle segment. For the time being, the company wants to focus on the 5-tonne and above segment, as there is more scope for expanding margins, compared to the volume generating small commercial vehicle segment.

However, Lal, who is also the managing director and chief executive officer of VECV, said the company could look at the sub-one tonne segment, where Tata’s Ace had a majority market share. “We could look at that segment once we have our plans through for the heavy and medium segment,” said Lal.

A senior company executive said Eicher branded products would be sold on a pilot basis by utilising Volvo’s distribution network in Indonesia.