Rajiv Bajaj, the MD of Bajaj Auto has responded to Siddhartha Lal’s tweet in his characteristic way, and it’s driving Bajaj and Royal Enfield fans ballistic. Here’s how it all panned out.
Siddhartha Lal, the CEO of Eicher – the company that owns Royal Enfield – tweeted this,
"Royal Enfield’s sales are equivalent to the global sales of Harley-Davidson, KTM, BMW, Triumph, and Ducati, combined. Let that sink in for a second."
Royal Enfield’s UK Technology Center Tour https://t.co/lURrhSoh4n via @MotorcycleCom
— Sid Lal (@sidlal) November 30, 2017
In fact, the words in Mr. Lal’s tweet are those carried by a motorcycle website in the UK, in a report about Royal Enfield’s UK-based development center. Business-Standard, an Indian business newspaper, reached out to Rajiv Bajaj for comment about Mr. Lal’s tweet. Mr. Bajaj said this,
By measuring solely on the basis of volumes at the exclusion of pricing power, it would seem that Maruti Suzuki is above and beyond brands like Mercedes, BMW, Audi and Porsche put together.
But what does Mr. Bajaj mean?
He’s essentially agreeing that Royal Enfield does have big sales numbers, which are much higher than the combined sales numbers of global motorcycle giants such as Harley Davidson, KTM, BMW Motorrad, Triumph and Ducati. However, in terms of total revenues and profits made per motorcycle, the global giants may be earning much more than Royal Enfield. This is because those premium motorcycles are priced much higher, with very high margins, than the ones sold by Royal Enfield.
Meanwhile, this isn’t the first time that Mr. Bajaj is talking about profitability. In the past as well, he’s said that EBIDTA (Earnings before interest, tax, depreciation and amortization) profit is more important than just revenues, and that Bajaj would not enter the automatic scooter market as the margins there are wafer thin. This is also the reason why Bajaj is said to prefer operating in the ‘premium motorcycle’ market rather than the commuter segments in India. Just in November this year, Mr. Bajaj was quoted saying that Bajaj Auto is India’s most profitable automotive company with EBITDA margins better than Maruti, M&M and Tata Motors.