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It could be a defining moment for Royal Enfield, which manufactures the iconic Bullet motorcycle. Last week, the media was abuzz with reports that the company is moving aggressively to buy Italian bike manufacturer Ducati, currently owned by Volkswagen’s premium car division Audi. This would catapult Royal Enfield into a select club of high-performance bike makers, as Ducati is known for its stylish, high-powered motorcycles that would blend with the ambitions of Bullet’s makers. While Ducati makes bikes powered by 800 cc and above engines, the Indian company’s highest capacity is 535 cc. Although Royal Enfield has refused to talk about the acquisition, according to market estimates, the Italian company could be valued at about Rs 10,500 crore for the sale.
Less than two decades ago, Bullet was desperately trying to stand its ground during the early rush for 100 cc Japanese motorcycles. The year 2000 was a make or break one. Sales had plummeted to below 2,000 a month and the holding company, Eicher Motors, was mulling over whether to shut down Royal Enfield, whose manufacturing facility was in Chennai.
Buying Ducati, now owned by Volkswagen, would catapult Royal Enfield into a select club of the makers of high-powered motorcycles.
Enter Siddhartha Lal, then a 26-year-old automotive engineer from the University of Leeds, who persuaded the board to give him a chance to revive the company. A motorcycle enthusiast and a big Bullet fan, Siddhartha could not see his favourite company—whose product had diehard fans like him, who had stood behind it despite a host of small problems—close down. Vikram Lal, Siddhartha’s father and the head of the company, decided to take a backseat and handed over the mantle to his young son, who was bursting with energy and ideas. And the son kickstarted a journey that not only took the company to a turnaround, but also revived Bullet’s iconic status and spurred a demand for expensive, heavy superbikes in India.
As CEO, Siddhartha looked at the company’s weaknesses to find what needed to be improved to raise sales—his primary objective and key to the turnaround. He was banking on Bullet’s reputation among its buyers and its aspirational value, which could be encashed with some improvements in the bike’s structure. He made it his priority to address common complaints of the bike’s users—mainly oil leakage (“Royal Oilfield”, many used to call it) besides engine and clutch issues.
That’s where Siddhartha did a smart thing—he tried to improve the process of the product’s manufacture, but did not change the product itself. “He did a complete makeover of the process engineering to make virtually the same product,” says auto enthusiast Murad Ali Baig. “The technology is basically the same but for a few changes in the bore stroke and piston, which gave it more power. But the phenomenal change is in the quality of workmanship. They made the production system more efficient and modern. So the product is technically the same and yet much better.”
By 2004, Siddhartha was head of the entire group, which had business interests in 15 different areas. He convinced the board to sell everything except Royal Enfield and the company’s trucks division and then focus on improving both. Royal Enfield, closer to his heart, was obviously top priority and got special attention. It was a relatively debt-free, stable organisation he had inherited, with experienced human resource willing to be led by him. “He gave the core team freedom to work on the process and introduced quality engineering. They took a bad product and changed it into a very good, reliable bike,” says auto expert Veeresh Malik.
Among the changes were switching the side of the gear shift, addressing the oil leakage problem and designing a new engine with less parts that produced more power, making the bike more fuel-efficient. This clicked with customers and it was an instant success despite a rather limited market for heavier bikes. In 2005, it sold about 25,000 bikes. The figure doubled by 2010, touching 50,000. Over the next four years, the figure increased six-fold to 3 lakh. The latest annual sales figure (2016-17) is 6,66,135—a 31.3 per cent growth over last year’s 5,07,163.
Siddhartha encashed Bullet’s reputation and aspirational value by improving the bike’s structure.
What helped Siddhartha was the change in market dynamics with a steadily rising demand for superbikes and with biking cults catching on. Earlier, India had a small market for commuter bikes and almost none for big bikes. This changed as the middle class started looking at bikes, and the more affluent at heavy bikes, even imported ones. This created a demand and pushed Siddhartha to introduce new products. Gradually, more products came from the Enfield stable, including Bullet 500 cc (350 cc continued though) and others like Thunderbird, Classic Desert Storm, the 535 cc Continental GT and the 411 cc Himalayan.
“The demand for lifestyle motorcycles is growing, which plays to the Enfield heritage and DNA. Enfield has seized this opportunity,” says Hormazd Sorabjee, automobile expert and editor, Autocar India. “Enfield is a brand success more than a product success. The bikes are old school, they lack modern tech and quality, but they still tug at the heart strings.”
Sorabjee credits Siddhartha for the company’s turnaround. “He is the only CEO who leads from the front by living and breathing the brand. He is a true biker himself. Enfield has built a strong community for its owners by investing in a huge amount of events and other activities for them. Enfield has given its bikes a strong identity and their owners a sense of belonging. They have played on the emotional side of biking rather than going the mass commuter route,” he says.
Besides changes in the processes and the product, Siddhartha also worked on the buying experience by expanding the company’s dealerships and improving the look and feel of the shops and its service network. His focused leadership helped the company see a healthy growth in India and also expand to markets in other parts of Asia, America and Europe. The Ducati takeover, if it happens, would not just expand his product portfolio and reach, but also bring global technology to his stable. “It will give them access to cutting-edge technology and global markets, but also stretch the company’s bandwidth enormously,” says Sorabjee.
Siddharth also took the truck business to new heights by tying up with Swedish firm Volvo for commercial vehicles—a venture that is running successfully.
“Royal Enfield has been investing in building capacity and capabilities,” says Siddhartha. “We will be investing Rs 800 crore in FY 2017-18 for our upcoming manufacturing facility at Vallam Vadagal near Chennai, product development, two technical centres in UK and India, and for market expansion. With this third plant, the combined capacity of Royal Enfield is expected to be 8.25 lakh motorcycles in 2017-18.”
With limited resources and moderate facilities, Siddhartha has demonstrated what one can do with improved processes and production methods even if the technology is old. His efforts in turning around Royal Enfield without going in for global technology upgradation has revived one of India’s iconic brands and stoked people’s aspirations of thinking big and achieving it.