OEM’s first wholly owned subsidiary launches in Milwaukee
Royal Enfield is a 114-year-old motorcycle manufacturer, but the India-based brand isn’t exactly a household name in North America. However, with a new wholly owned subsidiary taking over North American operations as of Jan. 1, the OEM plans to grow its presence in the U.S. and Canada.
For the past 15 years, Royal Enfield motorcycles have been distributed in the U.S. by Classic Motor Works (CMW) out of Fairbault, Minn., and while Royal Enfield has appreciated what CMW has done for the brand in the U.S., the OEM believes the wholly owned subsidiary will provide more strength and opportunity for growth.
“We think it’s a very exciting time for Royal Enfield,” Rod Copes, president of Royal Enfield North America, told Powersports Business. “They’re investing money in really getting a foothold in mature motorcycle markets like North America, in establishing a wholly owned subsidiary office. So there’s a lot of activity going on for Royal Enfield right now.”
Over the past five years, Royal Enfield has grown at more than 50 percent year-on-year. In 2014, the OEM sold more than 300,000 motorcycles globally, and its parent, Eicher Motors Ltd., racked up its highest ever total revenue at $1.4 billion. Copes reports that Royal Enfield is on track for 50 percent sales growth in 2015 as well, with 450,000 bikes produced and sold throughout the year.
“They’re going through very rapid growth in their home market in India, and along with that, the good news is they’re very profitable, too. So that’s allowed them to really reestablish their strategic objectives and goals going forward, and one of those was to really invest in a global marketplace and to become not just the largest, but the most influential and leading, middleweight motorcycle company in the world.”
Launching a subsidiary
Copes was handpicked to lead Royal Enfield’s new North America subsidiary — the OEM’s first subsidiary outside of India.
Copes spent nearly 20 years with Harley-Davidson, where he was responsible for the Motor Company’s international strategic plan. Part of his job was to research the Indian market, and he soon met Siddhartha Lal, who was CEO of Royal Enfield at the time. Copes said Lal was a welcoming host and helpful in teaching Copes about the Indian market.
When Lal, now CEO of Eicher, was looking for a candidate to lead the North American subsidiary of Royal Enfield, he called upon Copes, and Copes was glad to take the position.
Royal Enfield North America is based in Milwaukee in part because Copes lives there, but with the U.S. motorcycle market share leader in the same city, Milwaukee is also ripe with resources that a new motorcycle subsidiary would need.
Copes joined Royal Enfield about a year and a half ago. The first year was spent working out the transition plan with the U.S. and Canadian distributors, and over the past six months, he’s been building his team of industry veterans and putting processes for 2016 in place. Currently, Royal Enfield North America has a staff of 12, with plans to double that in the next year.
The subsidiary is housed in a temporary space, while its permanent home is being remodeled. Plans call for Royal Enfield to take over the first floor of a 101-year-old building in early 2016.
While the back part of the Royal Enfield space will house the subsidiary’s staff, the front will be a street-facing flagship dealership. The in-house dealership is designed to build the brand directly from Milwaukee and to allow Royal Enfield staff to experiment with new retail ideas before launching them to the full dealer network.
“We think it’s important to be close to the customer, so we think having a dealership that’s adjacent to our office will really allow us to interface with the customer, make sure that we’re providing the experience that they really want, because in the end it’s all about the customer,” Copes said.
In addition to the Milwaukee base, Royal Enfield North America also has a warehouse in the Dallas-Fort Worth area. Completely built bikes that will be sold in the U.S. and Canada will be shipped in crates to that warehouse, where staff will uncrate them and perform the pre-delivery inspection before sending them to dealers.
“What we’re planning on doing is centralizing that at our warehouse and having that done before the bike is shipped to the dealer. We just want to make sure that the product is 100-percent high quality and is exactly what the customer and the dealer expect when they take it out of the container,” Copes reported.
100 dealers in 2016
Royal Enfield North America has already begun to build its dealer network. One hundred key cities and metro areas in the U.S. and Canada have been identified as target markets, and Copes would like to have a dealer set up in each of those areas by the end of 2016.
“It’s looking at who are the best current motorcycle dealers in those metro areas. And we want to start at the top, so we go knock on the door of the best dealer in that metro area and explain who we are and what our proposition is,” he reported.
Royal Enfield is looking for a broad mix of dealers. Copes expects most will be large, multi-brand dealers, though some may end up as exclusive Royal Enfield dealerships in well-populated metro areas.
“We think that we offer something that most other motorcycle brands don’t, and we think we’re complementary to most of the motorcycles sold in the United States just because of our size — roughly 500ccs — affordability between $5,000 and $6,000, ease of use and simplicity,” he said.
The Royal Enfield team wants to work with dealers to make sure the process runs smoothly and offer dealers an opportunity to add to their revenue stream right off the bat.
“We want to make it simple and easy and very profitable for any dealer who takes on our brand. So we’re starting with those in mind up front and try to make sure not only do we provide a great customer experience, but we want to make sure it’s a great dealer experience as well because they’re our frontline sales folks,” Copes explained.
Royal Enfield’s first group of dealer prospects came from Classic Motor Works’ network. With the subsidiary taking over all operations as of Jan. 1, 2016, CMW’s dealer contracts end Dec. 31, 2015. Royal Enfield North America has asked some CMW dealers to apply for the subsidiary’s dealer network.
As the new year approaches, Royal Enfield plans to have about a dozen or two dozen dealers set up in January, with bikes and parts in stock.
“Our plans are to focus on the quality of the experience and the quality of the motorcycles and not just look for numbers. So we’re going to ramp up steadily and manage it, and learn as we go and adapt and adjust to make sure that we have quality and everything working well right from the start,” Copes said.
2016 and beyond
Royal Enfield North America is going into 2016 with three models available in the U.S. and Canada.
The Continental GT is a café racer-inspired by motorcycles from the 1960s. With a 535cc, single-cylinder, air-cooled, 4-stroke engine, the Continental GT is the newest model in the Royal Enfield lineup, and it will retail in the U.S. at just under $6,000. The Classic has a solo saddle, sprung seat and vintage style. It’s available with a 499cc engine and in multiple colors for about $5,500. The Bullet, which has been in continuous production for more than seven decades — with updated technology, of course — has a 499cc engine and an MSRP just under $5,000. Though any all-new models are at least a few years out, Royal Enfield is investing in R&D.
“They established an open design center, or a product development center, in England earlier this year, and they’ve hired quite a few engineers, and they’re actively working on several different motorcycles, a couple different motorcycle platforms that may take several years to launch. But the future of Royal Enfield definitely has many new products coming out for the global marketplace.”
With already-established bikes in its arsenal and new models to come, Royal Enfield North America plans to expand its market share over the coming years.
“In the past, they’ve sold hundreds of motorcycles a year in North America, and we want to over the next three to five years get to a point where we’re selling thousands of motorcycles a year, and we think the opportunity is there. We think the middleweight motorcycle segment in the United States has all but disappeared, and we think there’s a lot of consumers that are interested in motorcycling, but it’s a little bit intimidating,” Copes said.
He added, “We think we can bring what we call peer motorcycling back to the United States, which is an affordable, lighter weight, easy motorcycle to maintain and ride without breaking the bank, and we think the whole Millennial generation as well as existing riders or riders who have gotten out of the sport — we think we’ll appeal to a lot of demographics and really be inclusive as a brand. So we’re excited about the opportunity. We think there’s a lot of untapped potential in that segment of the marketplace.”
With this new investment in North America, Copes explained that Royal Enfield isn’t making a quick play for the market, but is instead looking to establish its brand in North America thoughtfully and for the long haul.
“The good news is Royal Enfield is really taking a long-term approach, and we’re in this for the next 20, 30, 40 years, and we want to grow steadily,” he said. “We’re not looking to get it all done next year. It’s going to be a very phased approach over several years, and we’ll adapt.”