Forbes India 30 Under 30 2023

'Next frontier is to take the motorcycle business to international markets'

Siddhartha Lal, MD & CEO at Eicher Motors, believes the company’s strong business model will see it through the sluggish economy

Published: Feb 6, 2014 08:45:08 AM IST
Updated: Feb 6, 2014 08:59:28 AM IST
'Next frontier is to take the motorcycle business to international markets'
Image: Amit Verma

Q: Eicher Motors has been doing really well on the stock market. It seems as if investors love the company. What sense do you make of it?
I don’t really. For us, that’s only an outcome and honestly so. What we have tried to bring in is a long-term, consistent and focussed approach. If you see in our commercial vehicles business, are we setting ourselves up to be the future of trucking? Are we putting all the pieces together, be it making more investments even during the downturn? We are willing to do that. We believe we are here to stay. In the motorcycle business, we had said about a year ago that we have been able to create something special in the Indian market. Now, we are on a trajectory and we are going to work to take it up and up and up. But we also realised that now we need to look at the next frontier and that is international markets.

I think we have created extremely strong business models in both our businesses. We are the only profitable commercial vehicle company in India today. And, at our peak in 2010, we had 10 percent Ebitda margin, which is very good for a commercial company, especially when we are entering a new segment. At the bottom level, we have been 5+ percent, which really validates our strategy. This proves we know how to behave in a cyclical industry. In the motorcycle business, the strength is in our brand. Our business model allows us to make 18 percent margins and going towards 20, which is top of the line for any automobile business anywhere in the world now.

Q: How are you pulling off such high margins?
Well, this is about the long term. Five-seven years ago, when there was a lot of opportunity to expand and grow and get into low excise locations, we pressure tested those opportunities really hard and found that for us, it made sense to continue to pay full excise duty and concentrate our energy on one location, Pithampur, rather than expand tremendously. With expansion, you have a full new capital outlay, management and a set of problems. We always think how we can extract the most of what we have. At our motorcycle plant in Thiruvattur, the consultants and everyone said this plant can only give you 2,000 units per month. At the peak, we have been able to take out 13,000 a month. That’s not 50 percent more, it is six and a half times more. Of course, we invested more in the plant, optimised it and outsourced a few things, but we squeezed as much as could from this one location. Only when one couldn’t set foot in the plant, we decided that we now need to set up a new plant. That’s the way we think and construct our business model.

Q: It is interesting that you have a lot more competition coming in both your businesses. What do you make of that?
This is life. In life, you meet competitors and that is never going to change. The strength has to be what the consumer thinks of you. So it is about differentiation. There is space for multiple players.

Q: What have you picked up from Volvo, your joint venture partner?
A lot. Now the joint venture is truly without colour. What people see are the products and all the new products have a lot of Volvo in them, but the real benefit is in the back end, which is not visible. It is in the process, in the way of thinking, in the product development process, in the aftermarket process, it is being able to tap the best resources in the world for any issue we have.

Q: How do you split your mindspace between Enfield and trucks?
Till 2010, I was running the truck business and 90 percent of my time was in trucks. Since then, I have been on the board of the truck business, so I am not running it in an operational way. Now, my daily thing is Royal Enfield. So my mindspace should be 80:20 now.

Q: What’s the next frontier for the Royal Enfield?
It is taking our style of motorcycling international. Which is fun, exciting, non-intimidating style of motorcycling. We have a global ambition now in our motorcycling business.

Check out our Festive offers upto Rs.1000/- off website prices on subscriptions + Gift card worth Rs 500/- from Click here to know more.

Post Your Comment
Required, will not be published
All comments are moderated