Bajaj And Hero May Have Brands, But It Is Culture That Fuels Royal Enfield

Rajiv Bajaj has a knack for making headlines with his words as much as with his actions. The chief executive officer of India’s largest two-wheeler company by market capitalisation can whet the media’s appetite with quick one-liners, such as his "Mad in India" remark a few years ago to describe hurdles being faced by his company to launch its quadri-cycle in India and his recent analogy of BET (Bajaj, Enfield, TVS) devouring OATS (Ola, Ather, Tork, SmartE) for breakfast.

Naturally, I tuned in to the launch of the Bajaj-Triumph 400cc motorcycle on Wednesday and hung on to Bajaj’s words. To be honest, I was taken aback when he mentioned an American robber and suggested that there are riches to be stolen from Royal Enfield. He was talking about Royal Enfield’s monopoly in the 350cc and above category, which also offers very healthy margins.

Undoubtedly, Royal Enfield, under the guidance of its parent company, Eicher Motors, commands impressive gross margins of up to 43% on its motorcycles and enjoys a staggering 95% market share in the middleweight category. It is in an enviable and profitable position, which explains why both Bajaj Auto and Hero MotoCorp have taken aim at the middleweight category, each with their own globally recognised icons. Bajaj, in particular, has taken more than one shot with the Dominor and the KTM series of motorcycles.

However, venturing into the lifestyle segment with the profit margin as the sole focus reflects a mindset confined to boardrooms and charts. This is where the distinction lies between the challengers and the incumbent.

The incumbent, Royal Enfield, has mastered the art of embracing a non-corporate mindset while operating on a large scale. It was an early adopter of the biking culture that Harley-Davidson and Triumph Motorcycles established in the West, and it pretty much owns that space in India. It is a company that prioritises its culture and community over mere financial gains, refusing to compromise on its values.

That said, Royal Enfield still perceives itself as a challenger brand, just as it did 20 years ago when it launched the Bullet Electra to break free from its past. At that time, Ducati and Triumph posters adorned its Tiruvottiyur plant, and the team would sing their praises.

Its commitment to the riders remains unwavering: Royal Enfield is dedicated to nurturing a motorcycling culture and making decisions in the best interests of the riders. Royal Enfield believes it owes a lot to its riders and that it must keep repaying that debt. Instead of focusing on numbers or customer acquisition, it centres its narrative around creating enjoyable and effortless motorcycling, and sharing captivating stories about them. It avoids discussing commuting because it operates in a more mature segment. After all, only a few riders embark on a journey to Ladakh.

The essence of this segment lies in motorcycles representing more than just profit-making machines; they symbolise a delicate harmony between experience and the rider's potential. Just as Nike creates a culture of celebrating sports and Apple crafts experiences, Royal Enfield's purpose is to build a motorcycling culture.

The Harley-Davidson and Triumph brand names might give Hero and Bajaj a launchpad, but this must also lead to embracing and recreating the spirit of Harley and Triumph in India, seamlessly blending the joy of riding with a sense of pride.

Admittedly, one can detect arrogance on the part of Royal Enfield. The average price of its motorcycles has increased by 40-50% over the past half a dozen years, yet its sales have not reached the peak of 2018. In doing so, it has unintentionally lowered a significant barrier to entry into the segment, making it easier for competitors to gain traction.

The imminent entry of TVS-owned Norton into the segment adds to the sizzle. It is unlikely that TVS will engage in a pricing battle and instead focus on delivering value.

Knowing the storytellers at Royal Enfield, I can see them smiling. They will eagerly wait to see what others would do in this space.

They have earned their success, and it is time to enjoy the ride. Ultimately, it will be a battle of product experts versus brand experts.

Amrit Raj is a former business journalist and the author of 'Indian Icon - A Cult Called Royal Enfield', which received the Gaja Capital Best Business Book Prize in 2022.

The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.