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Eicher Motors: Rebalance strategy to create agile, resilient & timeless business!!!

ICICIdirect Research 16 Aug 2022 DISCLAIMER

What's Buzzing:

Eicher Motors hosted an Investor Day in the past week wherein it shared and communicated about its rich brand history, the motorcycling culture across the organisation, concept behind the new Hunter 350 launch and affirmative steps that it is taking to rebalance the growth strategy within the prime objective to bring harmony between man, machine and terrain.

Context: 

Eicher Motors is the leader in the premium motorcycle segment with market share in >250 cc segment pegged at >85%+ domestically. With the launch of 650 cc twins it is also expanding geographically with market share in international markets pegged at ~10% in the mid-weight segment. Further addressing the customer need of affordable RE product, which is easy to manoeuvre, the company has launched new Hunter 350 at an ex-showroom price of Rs 1.5 lakh/unit. 

Our Perspective 

The company continues to be driven by community, culture & craft and desires to offer superior and pure motorcycling experience & wide variety of product offerings each unique in its own way. Its overall manufacturing capacity is pegged at ~12 lakh units annually with average age of buyers coming down and currently at ~27-28 years. It has over 2100 touch points domestically (large size stores, studio stores) with similar international prints at over 840. Domestically with the launch of Hunter 350 at a lucrative price point it wants to tap the first time buyers and upgrades from the 100cc+ segment and sees >125 cc segment as its addressable market with market size pegged at ~32 lakh units (sales in FY22 at 5.2 lakh units) while internationally the addressable market size is pegged at ~10 lakh units (sales in FY22 at 0.8 lakh units). On the EV front, the company is currently working on the born electric version based on need of different users however the launch it is still three to five years away. It is also working upon augmenting its adjacent businesses (accessories, merchandise and spare parts), which add back to the parent brand. On the VECV front, the management guided about healthy three years for the domestic CV industry with impressive portfolio especially in heavy duty trucks due to high uptime. Further VECV is expanding network by opening new dealership & focusing on dealership profitability. Further VECV remains future ready with alternate fuel options with present order book for E-Bus pegged at ~190 units. We believe volume growth will revive at Eicher Motors with the company all set to achieve profitable growth, going forward, with primary focus on increasing numbers in absolute terms rather than in percentages.

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