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New Classic gets off to a good start; Supply remains key

We conducted Royal Enfield (RE) focused channel checks across 8 states to gauge the customer response towards the updated Classic 350, launched on 1st Sept'21. As per the checks, new Classic has got off to a good start. Customer feedback is positive owing to upgraded technicals and ride comfort. While most sales are through walk-ins enquiries, RE's MiY platform is accounting for 10-20% of the bookings (catering to the demand from the work-from-home segment).

The waiting period for the new Classic is relatively better than other variants at 1-1.5 months’ time quoted by the dealers. This is also leading to some shift in the Meteor bookings towards the new Classic. In the past few months, RE’s production capacity has been capped owing to regional lockdowns and supply chain related challenges. While dealers remain optimistic on the demand for the new product in the coming months, consistent flow of supply from RE remains a key monitorable.

In the past, RE has focused on gathering bookings and accordingly adjusting production schedules. This time around dealers would like the company to focus on wholesales from the beginning and not keep customers waiting for the new product. With 65% of vehicles being financed, dealers do not find the price to be on the higher side and impacting demand.

* ‘Classic’ remains classic: no major appearance changes a safe bet: Dealers highlighted positive consumer traction for the new Classic 350 supported by its improved performance, low vibration, and seating comfort. Classic is the highest selling brand in RE’s portfolio, and accounts for 60-70% of total sales. In terms of the looks, the product has retained its vintage appearance, but offers a selection of variants and features as addons. As per the dealers, this is a safe approach to avoid disturbing the character of the product and in turn confusing the customers. Dealers have started offering test drives and booking momentum remains healthy.

* ‘Halcyon’ variant most preferred: The majority of RE sales are from walk-in customers and enquiries, while the share of customers booking vehicles through the MiY online platform is at 10-20%. Entry level Redditch series (starting at INR 184k) comes in single disc option, and forms the entry variant. The Halcyon series, which is one variant over Redditch, with dual discs is getting the maximum traction. Over and above the Halcyon series there is Signals, Dark, and Chrome variants. While Halcyon is priced INR 10k more than Redditch, Signals and Chrome variants are INR 20k and INR 30k more expensive, respectively. The share of customers opting for add-on features (which increases the selling price by INR c.7k) is at 20%. Dealers are communicating a waiting period of 1-1.5 months for the new Classic.

* Supply constraints continue: Since Nov'20, supply from the company has remained erratic. The production has been impacted time to time by either the regional lockdowns or supply chain related challenges. Currently, Meteor has a high waiting period of close to 3 months. Dealers are communicating 1-1.5 months of waiting for the new Classic. Due to this some of the Meteor bookings are also shifting to the new Classic.

* Dealers optimistic about the success of new Classic; consistent supply a key: Demand for the new Classic 350 is expected to gain momentum in the near-term owing to technical upgrades and better ride quality. Upcoming festive season will also act as a positive trigger. Given the supply constraints in the last few months, wholesales will remain a function of supply. In the past, RE has focused on gathering bookings and accordingly planning the production. This time around dealers want the company to be more aggressive and focus on a ‘wholesales-push’ strategy rather than a ‘market-pull’ strategy.

* Price increase not acting as a dampener: Price hikes taken during July and September are not impacting demand at the moment due to healthy finance availability. The new Classic 350 has also witnessed an increase of close to INR 10,000 vis-à-vis the outgoing model. The increase in price for Classic 350 is not a deterrent as per the dealer feedback owing to 65% of sales being financed.

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