Success Story of Eicher Motors

19/03/2021 06:38 PM By Rabi

Royal Enfield (Bullet): From Good to Great

Let’s say you have been given a choice: Become the owner of 15 mediocre businesses or become the owner of 2 businesses who are market leaders,
What would you choose? If you thought of the 2nd option, your choice would match with what the Managing Director of Eicher Motors, Siddharth Lal, had chosen around 17 years ago. Siddhartha Lal was all of 26 when he took over as CEO of Royal Enfield in 2000. If you had spent Rs 55,000 to buy a Royal Enfield motorcycle in 2001, you would now have an old, rugged bike. But if you had invested the same Rs 55,000 in shares (at Rs 17.50 per share) of Eicher Motors, the company that makes Enfield bikes, your investment will be worth Rs 4.75 crore now.

In 2004, when Eicher Motors was struggling with overcoming mediocrity and average performance in each of its 15 different businesses including trucks, motorcycles, components, footwear and garments. Lal undertook an intense portfolio analysis and took a hard call. He decided to divest 13 businesses and focus behind Royal Enfield and Trucks, two businesses in which he thought there is a genuine shot for Market leadership.

"In my mind the basic question was this: do we want to be a mediocre player in 15 small businesses or just be good in one or two businesses,That’s why we sold 13 out of the 15 businesses, We removed the clutter and focussed on two promising businesses." Back then, conglomerates viewed businesses as family jewels. It was a deadly sin to sell anything. But Lal sold almost everything. "Many did think Eicher was going out to get bankrupt, "Motorcycles were the joker in the pack, I did the mathematics, projections and all we needed was to get the motorcycle business to the next level (in terms of sales)."

Here’s a story of the company that began with doing it all and finally stopped at doing the two things it did best! It is because of this saga that India got the heartthrob of its road- the Bullet or as it is lovingly called “bullet”.

HUMBLE BEGINNINGS

The origins of Eicher Motors in India dates back to 1948, when it was established as Goodearth Company for the distribution and service of imported tractors. In 1959, the company merged with a German tractor company called Eicher Tractor company, which led to the formation of the Eicher Tractor Corporation of India Private Ltd. Since 1965, Eicher in India has been completely owned by Indian shareholders.

In the 1990s, Eicher Motors merged with its to-be star product, Royal Enfield. From the beginning of this merger, the Royal Enfield segment of Eicher had been struggling to perform.

In the year 2000 Eicher was a major loss-making company, when Royal Enfield division had booked a loss of around 20 crores. Because of this situation, the senior executives of the company decided to shut down the entire bike division.

2004: Siddharth Lal takes over as COO  

Siddharth Lal,the son of the Vikram Lal(then-CEO of Eicher Motors) had great passion towards motorcycles, so he decided to give his life to Royal Enfield Brand. He joined the company as the head of sales, marketing and product development but realized that he had to be on the top to actually make a difference.

So, he requested a chance to save Royal Enfield with Eicher Motors, as Eicher Motors was planning to shut down the Royal Enfield brand. Luckily, all the board members agreed with the decision of Siddhartha Lal to save Royal Enfield.

As the initial phase of his revival plan, Lal decided to shift the company's entire focus on Royal Enfield first. And so, as the first step, he ordered the shutdown of Enfield’s new Jaipur plant in order to initiate necessary cost cutting and shift funds towards Enfield's existing plants . The next step was to stop with the dealer discounts which were costing the company around 80 Lac per month.

A series of more such decisions became a positive driver of the bikes’ sales, which is why, after a short dip in the sales numbers, there was no turning back; and Royal Enfield, as we mentioned earlier, became the star of Eicher Motors.

Joint venture

After turning around the situation of bikes, Lal moved his attention to Eicher’s truck segment in 2006. He got into a joint venture with Volvo and created VE Commercial Vehicles (VECV); in which Eicher and Volvo hold 54.4% and 45.6% respectively. This alliance also managed to create a world class portfolio in medium and heavy trucks through the pro-series range.

The Later Years  

Currently, Siddharth Lal is the managing director (MD) of Eicher Motors, a director of Eicher Goodearth Limited and the chairman and MD of VE Commercial Vehicles.

Under the leadership and futuristic vision of Siddharth Lal, Eicher Motors entered its golden years in the last decade. After crucial decisions on Enfield, as the quality of the bikes improved, the sales grew significantly too.

Siddhartha Lal vividly used various marketing techniques for popularising the Royal Enfield brand. Royal Enfield was marketed as a powerful and adventurous bike, so, Royal Enfield began to sponsor many off-road rallies, adventurous rides and many events, like Himalayan Odyssey, Rider Mania in Goa, etc. Also, there are many rider clubs for Royal Enfield riders. Royal Enfield set up classic retail outlets at many parts of the country to enhance their customers biking experience.

Surpassing Harley Davidson

In 2015, the sales of Royal Enfield motorcycles surpassed that of Harley Davidson globally. Eventually, Royal Enfield became a market leader in over 250 cc bikes in India. On 18 September 2017, Royal Enfield launched its classic 350 and Classic 500 bikes. In 2018, Vikram Lal, the father of Siddhartha Lal became the 14th richest person in India. Siddhartha Lal transformed a struggling business into a successful business with his hard work and passion. After its huge success in India, Royal Enfield is eying on global expansion. Royal Enfield also established its R and D centre in London.

Talking about the truck segment, in 2020 Eicher Motor’s VECV bought Volvo Buses India operations for ₹100 crores.

Eicher’s sales dipped for a short while owing to the pandemic, however, things took a turn for the brighter side again.

In February 2021, Eicher Motors recorded a 10% growth in Royal Enfield sales to 69,659 units against 63,536 units sold in the same month a year ago. From the total, exports skyrocketed a whopping 94% to sales of 4,545 units in the latest month compared to 2,348 units of February 2020.

The story of Eicher Motors’ comeback is one of the best examples of the power of an efficient leadership. If Royal Enfield is the star of Eicher, Siddharth Lal was surely its director and producer and everything else that made Eicher what it is today.

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