With the new GST 2.0 tax structure having increased the duty on bikes above 350cc to 40 percent, manufacturers like Bajaj have announced that they will be scaling down the engines on the Triumph 400 range and KTM 390 range to sub 350cc. Royal Enfield has now confirmed to us that it will not be making any similar changes to its 350cc plus line up.
Royal Enfield engines will not be downsized
New GST structure creates 22 percent price difference
We met with senior leadership at the company’s annual MotoVerse festival at Goa where Chairman and MD Sid Lal confirmed to us that while the company does not have any plans to downsize any existing products, the new GST regulation does hit the company and they will need to react to it. “It’s a sudden shift and it affects things in India. There will be a tendency to have 349cc bikes because there’s now a 22 percent difference which is big. Of course it affects our product strategy but we are also working on trying to figure out a plan to convince the government to consider otherwise.”
Lal went on to explain how this could have implications for the brand’s export business as well. “The most important thing for us in this is the international market. What India provides us is scale to get our costs down to be able to sell internationally. Overseas, we are relatively small whereas here in India we are established, so to get into those markets we need to have the right cost structures in India. If the market shrinks for above 350cc in India, then we have a scale issue. We have already reached a certain scale in our 450 and 650/750 platforms that I think we are certainly at the point where we can continue and there’s nothing that we need to do at these product levels. But on the margin, it will affect us in terms of India sales that could slow down.”
Company CEO B Govindrajan also shared his take on how the full impact of this will take time to measure, and how the company can work around it. “ For us, one advantage is that we have been selling an equal quantity of bikes outside India to what we sell in India when it comes to bikes above 350cc. One way to offset this is to increase the sales outside of India, but equally, we will be going back to the government to present our case once again.”
He went on to say that this move comes as a pressure to the business and that they are currently exploring all avenues, but that they remain committed to the mid-capacity segment. “We are the sort of company that does not react immediately and our investments into 250cc-750cc continue. In our analysis, the 650cc customer is slightly different and the rate of recovery has been a little better. In the 450cc segment, the rate of recovery is looking slower and there has been some news of other manufacturers reducing their engine sizes. We won’t do that and we will find some other ways.”
