Sumant Banerji December 11, 2019
As far as taking bold decisions as a strategic ploy for businesses go, Siddhartha Lal's call to divest 13 group businesses, including the profitable tractors unit, to revive a struggling Royal Enfield almost 15 years ago, was as inspirational as they come.
The overhaul at Enfield, by streamlining costs, bringing in new technology, making the bikes more reliable and user-friendly and overhauling the dealer, service and supply network has been a stupendous success. Today, the company sells in a month more than double what it sold in an entire year in 2005. Having produced over 800,000 motorcycles in 2018/19, Enfield was by far the world's biggest middle weight (classified as those with engines bigger than 250cc and smaller than 750cc) mobike maker.
Between fiscals 2016 and 2019, it also grew exceptionally fast financially, which underlines that its growth has not come at the cost of profitability. Eicher Motors revenues grew at an average of about 26 per cent per annum over the last three years and profits by an equally impressive 16.5 per cent during the period. Barring banking and financial services companies, Eicher is one of the best performing companies on our list, and Lal is the jury's pick for the Best CEO in the automobile sector.
Having done the hard work in reviving and strengthening the company, Lal is now busy taking the company global. Last year, Enfield launched its first big motorcycle with an engine displacement of more than 500cc. The Interceptor twins, which were developed entirely out of the company's Leicestershire development centre in Britain, also the base for Lal these days, are its first project with a two-cylinder configuration in almost 50 years.
"In a lot of cases, in markets outside India, the performance of our bikes did not match with what they required. In India, a Classic 500 is a lovely highway motorcycle because you are riding around at 100 or below 100 kmph. You are not doing 140 kmph," Lal said when the bike was first showcased in India two years ago. "But on Western highways, when you want to go at 140 kmph, I can understand why so many people feel that even the 500 gets rough after a few hours of riding. It is not a balanced engine. At relatively low speeds it does the job superbly but at high speeds, it takes a bit of a toll. We weren't a bike that could be the only bike for a serious rider. That is where the Interceptor comes in. It absolutely does the job on the highway anywhere in the world."
The success in India has clearly emboldened Lal. The spring in his step is perceptible, and he is dreaming big. He believes though, that this isn't a risky but an obvious thing to do for Enfield.
"There is an absolute gaping hole in the market internationally. It is like seeing an open unprotected goal in a football field and you know you have to go for it even if you are at the halfway line. You cannot let it pass," he said.
"In emerging markets it is nearly an India-like story. There is a huge base of commuters. They are all motorcycling daily. Some do it only because they have to and they are not really our target audience. Some like motorcycling but all they want is to move to a car. Again that is not our target. There is a big profile that actually enjoys motorcycling and would like to get deeper into biking. That phenomenon exists in markets around the world - Indonesia, Thailand, Latin America, all ASEAN countries," Lal added.
Much like the overall market, Enfield is also currently struggling for growth in the Indian market this year. The waiting periods on its bread and butter 350cc Bullet and Classic are gone and it is set to post its first annual decline in sales in more than a decade. Lal believes this to be a temporary slump that doesn't hamper the overall appeal of an Enfield.
"We've remained focused on building greater accessibility for our consumers, through new variant launches and improving our retail footprint. These efforts are beginning to yield good results for us," Lal said after the second quarter results of the company were declared in November this year.
About 15 years back, the bikes the company was producing were fragile, rickety and prone to breakdowns. For all the emotional retro appeal it had with enthusiast bikers, one of the running jokes about the Bullet was the pool of engine oil it would leave behind when parked even for a few hours at any spot. This made the bikes expensive to maintain and limited its sales potential. In 2005, the company was making and selling barely 25,000 bikes every year, which was about a third of its installed capacity. Losses were mounting and investors were restive but Lal, an avid biker himself, was convinced that the Bullet had potential.
"It was very clear to me that Enfield had a future but it needed scale," Lal told BT in 2017. "The challenges were clear. We needed to fix the product, make it more reliable, bring in new technology. I had the backing of the board but it was tough to sell off the tractor business (to TAFE). The question really was whether we wanted to do a lot of things without excelling in any or do a few with real expertise? The answer was obvious."
In April 2019, Lal took another bold step. He announced his decision to step down from the position of Royal Enfield's CEO handing over the reins of the company to former head of Ashok Leyland, Vinod Dasari. It was a move reminiscent of his father Vikram Lal, who in 1997 stepped down from Eicher Motors and allowed professionals to run the company.
Lal now wants to focus more on strategy in the long term and the absence of the CEO's hat frees him up for more engagement on future products. His obsession of making Enfield a global brand is visible but giving Dasari the free hand - Lal has also given up executive responsibilities at the company - ensures the India business remains steady and without conflicts.
"To achieve our audacious goal of 2030, to catalyse and reshape the world of motorcycling towards middle-weights, thereby growing at twice the pace of the industry, I believe that we now need to run the company differently. While I have thoroughly enjoyed being at the helm of Royal Enfield for a large part of the 20 years that I have spent here, I believe I can serve Royal Enfield better by playing a role that is different from the CEO," he said in a letter to his employees.
Being named among the Best CEOs of the country is the perfect sign off.