Ladies and gentlemen, good day and welcome to Eicher Motors Limited Q4 FY 2025 earnings conference call hosted by Avendus Spar k. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ram Seshan from Avendus Spar k. Thank you, and over to you, sir.
Thank you, Ruthuja. Good evening, everybody. Welcome to the earnings call. Pleased to be joined today by the leadership team of Eicher. We have with us Mr. Vinod Aggarwal, Vice Chairman Eicher Motors, and MD/CEO of VECV. Mr. B. Govindarajan, MD Eicher Motors and CEO of Royal Enfield, and Ms. Vidhya Srinivasan, CFO of Eicher Motors. I will now request the management to make their opening remarks. Please go ahead, sir.
Thank you, Ram. Hello, everyone. I hope all of you guys are doing well. Thank you for joining Eicher Motors Limited earnings call for the quarter, and financial year ended March 31, 2025. It's been a very strong year at Eicher Motors. We have seen consistent growth quarter after quarter, and both Royal Enfield and VECV have delivered solid performances. We have stayed focused on building long-term value, and this results reflect that. Starting with numbers for the fourth quarter, Eicher posted a record performance with consolidated revenue of INR 5,241 crore and EBITDA of INR 1,258 crore, and profit after tax stood at INR 1,362 crore. Not just the past quarter, our growth momentum continued to show great results in the financial year ended March 31st as well, with the revenue growing to INR 18,870 crore, with an EBITDA of INR 4,712 crore. That for the year stood at INR 4,734 crore.
The strong performance was a result of an all-round growth at both Royal Enfield and VECV. Now, let me start with Royal Enfield first. We had one of our best years ever and maintained our leadership in the premium motorcycle segment, with the motorcycle sales crossing 1 million plus units for the first time in our history. We introduced six new motorcycles in the past year. We strengthened our product portfolio to meet the diverse needs of our customers right here in India and across the globe. We launched the Bear 650, which is a bold new expression of our new twin-cylinder lineup. The Guerrilla 450, powered by our Sherpa engine, is a whole new take on urban agility, mobility, and adventure.
We also celebrated the year of the Classic with the three motorcycles that really showcased our design and craftsmanship: Classic 650, which we launched recently, and Goan Classic 350, and of course, the Classic 350 itself. Our motorcycles continued to do well in the past quarter and in the financial year with the sales of about 280,801 motorcycles in the fourth quarter, up by almost about 23.2% year- on- year. In the past financial year, we sold about 1 million plus motorcycles. It's almost 1,002,893 motorcycles, to be precise, marking a 10% increase over the previous year. Our domestic sales stood at 902,757 units, which is up by about 8% on a year-on-year basis. Our international volume stood at about 30,900 units for the fourth quarter, and in the year-on-year, it grew by almost about 29.7%, touching 101,036 units.
This year was a very meaningful progress, which we made in many other fronts also. We made our big move into our electric with the Flying Flea in-house of Royal Enfield. We began with a showcase of Flying Flea at EICMA, followed by the unveiling of the two models, FF C6 and FF.S6, which has received a very strong interest from all over the globe customers. We are on track to officially launch this. Our motorcycles continue to win a lot of recognition during the year. We received about a dozen plus awards for the design, innovation, and performance of the motorcycles in this year. Most importantly, I wanted to share with you that J.D. Power has ranked us as the highest in the overall two-wheeler initial quality study, a direct reflection of our focus on the customer satisfaction.
Beyond our motorcycle, the Royal Enfield ecosystem also has grown stronger than ever. We inaugurated a new spare parts warehouse in Mumbai in the past year. We now have four regional warehouses, including in Chandigarh, Mumbai, and Kolkata. In addition to the business achievements, we also work hard to bring riders together in the motors. Normally, we have it in the month of November. This year, we saw a gathering of 10,000 plus customers riding into Goa to participate in the Motoverse. Art of Motorcycling saw a very successful Season 4 with an increased participation during this time. Globally, our expansion strategy gained significant momentum this year. We inaugurated our first fully-owned CKD assembly plant outside India in Thailand. We also began operations of a new manufacturing facility and flagship showroom in Bangladesh, enhancing our ability to meet local demand while maintaining our quality standards.
Today, Royal Enfield ranks among the top mid-segment motorcycle brands in the market, such as the U.K., Korea, Australia, New Zealand, and all the markets wherever we are entering. Our market share is steadily going up. As we said earlier, also, we are looking at all these things for a long-term ambition. Equally important to us is our commitment to the social and environmental responsibility. Sustainability remains at the heart of what we do. Our motorcycles are designed for more than 97% recyclability and reusability. Our plants now consume about 86% of electricity from the renewable sources, and our net water positive to the tune of 2.6x . We are also committed to send no waste to the landfills from our operations. We launched several green initiatives in Himachal Pradesh, Spiti in Kullu district. This includes Camp Kharu, our first Green Pit Stop along the Leh-Manali Highway.
We also launched Journeying Across the Himalayas as the first of its kind 10-day festival in Delhi that celebrated the region's natural beauty and culture. Now, moving on to VECV, our performance has continued to beat industry trends. Now, I will request Mr. Vinod Aggarwal to talk about the commercial vehicles' performance. Over to you, Vinod.
Thank you, Govind. The financial year 2025 has been a record year for us, as we delivered more than 90,000 trucks and buses and crossed INR 23,500 crore in top line. I'll begin with the financial performance for the fourth quarter and the financial year 2024-2025. We had the robust sales performance of 28,675 units in quarter four of 2025 and 90,000 units in financial year 2025, our best-ever performance. VECV revenues rose to INR 7,139 crore in quarter four, up 13.8% from INR 6,275 crore in quarter four of financial year 2024. For financial year 2025, VECV revenue from operations was INR 23,548 crore, which is up 7.7% from the previous year. The EBITDA stood at INR 732 crore for the quarter and INR 2,030 crore for the full year, up 18.4% from INR 1,715 crore in the previous financial year.
The EBITDA margin for the quarter was at 10.5% and at 8.8% for the financial year 2025. As you can see, the EBITDA margin has significantly improved from 7.8% last year, quarter four, to 10.5% in this current quarter four. Profit after tax for the quarter was INR 457 crore and INR 1,284 crore in financial year 2025, up 56.8%. We had a record performance on many parameters, such as highest sales units with a growth of 5.4% against the market, which was flat at just around 0.3% growth. We became number one in Light and Medium-duty trucks market share. We have now 36% market share in Light and Medium-duty trucks, which is 5- 18 tons, and we are number one in the market now.
We had record sales of Heavy Duty trucks, buses, and spare parts, engineering components, and part solutions, which include gensets as well as the industrial engines. We entered the large-small commercial vehicle segment with electric-first Eicher Pro X, which is 3-3.5 ton gross vehicle weight. We had highest-ever quarter four sales for Eicher Heavy-duty trucks at 6,765 units with a market share of 9.1% on the Eicher side. Including Volvo, the market share is 9.7% for the full year. In the Light and Medium-duty truck segment, we sold 11,591 units in the quarter, achieving our highest-ever market share of 37.1% in the market in Light and Medium-duty in quarter four. We sold 7,568 units in the bus segment, making it our highest-ever sales in a quarter. We received five Apollo CV awards, including prestigious Transport Solutions Provider of the year.
As the Indian economy grows and the logistics industry transforms, VECV continues to drive modernization and remain at the forefront. During the past year, we launched 92 new products and variants. These include Eicher LMD powered HD trucks for long-haul applications. We also delivered over 50 Volvo FM tractors for road-train applications. We continue to develop electric and alternate fuel waste solutions on our existing product range. During financial year 2025, we successfully launched the Eicher Pro X Small Truck, specifically designed for the 2-3.5 ton segment. Delivery started with electric first, reflecting our commitment to deliver sustainable solutions to the last mile and delivery operations. On the sustainability front, in Financial Year 2025, we made significant progress by addressing various elements. Driving inclusivity in the CV industry, the Eicher Pro X is assembled on an all-woman line at our state-of-the-art Industry 4.0 compliant factory in Bhopal.
This is the first time that we see the all-woman assembling the trucks on the assembly line in a truck plant. Our renewable energy capacity with a 4.5 MW rooftop solar project is expected to reduce emissions by 25%. We also recycled 52 million liters of water at our Bhopal plant through an artificial water reservoir that also supports local birds and fish. Furthermore, our carbon offsetting efforts continued with the planting of 66,000 trees, anticipated to offset 660 tons of CO2 emissions. Now, I hand over back to Govind for further update.
Thank you, Vinod. Before we move on, I would like to briefly touch on some key changes, and I'm sure you all would have followed in our board. Siddhartha was the MD and CEO of Eicher Motors as taken over as an Executive Chairman of Eicher Motors. Vinod Aggarwal, MD and CEO of VECV Commercial Vehicle Business, is now, apart from the MD and CEO of Commercial Vehicle, he is the Vice Chairman of Eicher Motors Board. I took a larger role as a Managing Director of Eicher Motors. We also welcomed new Directors who bring in diverse experience from different sectors to Eicher. Their combined insights are already adding meaningful value as we plan for the future and navigate an increasingly dynamic environment. At Eicher Motors, this year, it has been a phenomenal growth for both Royal Enfield and VECV.
With all the steps into the New Year, which we are confident we will continue to build on the success with many more exciting things ahead. Thank you all for being with us on this call today. We can now move on to Q&A. Over to you, Ram.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Binay from Morgan Stanley. Please go ahead.
Hi, team. Thanks for the opportunity. My question is relating to the margins. Could you comment on two, three things on that? First is that we've seen raw material to sales trend up in this quarter. Secondly, in the earlier conference call, we'd highlighted that Q3 had a lot of one-offs in the other expense line item. What are your takes on the Q4 other expense number because it is almost flat quarter- over- quarter? Thirdly, the cost relating to OBD2B, have you passed that on fully to the consumer? What was the price hike? That's the question from my side. Thanks.
Yeah, I think there are a number of questions over there. If I can address, as far as gross profit is concerned, I think if you're talking quarter versus last quarter or I'm not quite sure whether you're talking.
Quarter- over- quarter.
Yeah. So basically, we are saying versus last quarter, we are talking about the 30 basis points on account of model and variant mix, which is really a higher share of some of the models like the Battalion Black, where we are seeing very good traction and growth in terms of absolute sales. I think if you step back, I think the big message that we kind of talked about several quarters now, including last quarter, is that our focus is on absolute growth and absolute gross profit growth, not necessarily on percentages. I think as part of that strategy, as far as both the new Classic as well as the new Battalion Black, we've made a lot of additions to the product in terms of features, etc. We have effectively kept, while we shared the cost, we've not changed it in a percentage basis.
I think about 30 basis points on account of the model and variant mix. We have about a 20 basis points impact of higher commodity prices in Steel and Aluminum, and about 20 basis points, which is on account of some inventory provisions for a few old bikes. Effectively, that is what is causing impact of, I think, approximately 19 basis points versus Q3 of this year. As far as other expenses are concerned, which is, I think, your next question, I had not necessarily talked about any specific quantum of one-offs, but let me address that as well. Versus Q3, we've had an increase of about INR 9 crore as far as other expenses are concerned. Out of that, we've had a INR 30 crore reduction of marketing expenses versus Q3. While launch and event expenses have reduced versus Q3, we've increased investments and sustenance.
The classic volume growth is reflecting that, for example, we've had a growth of 15% in the last six months. In addition to that, we've also had about INR 20 crore increase on account of volume-related expenses because we've had a significant increase in volumes versus Q3 as well. About INR 20 crore on account of that. INR 19 crore is impact of expenses that we've incurred in Europe, where a few distributors are in liquidation. This is something that is an impact that has happened. Yeah, that's essentially what is happening.
The last question. So largely, both are in a way, there's no one-off in the other expenses in Q4.
We are not out of one-offs because you guys then come back and tell me. I think maybe the 19 because of Europe, we can say.
With the recent Hunter launch that we've done, do you think the gross margin trend will trajectory-wise remain the same, or have you passed on all the costs that you've added to the vehicle in the relaunch?
Yeah, that's a leading question, Amman. As Vidhya was mentioning, it's a balance between the growth and the profitability percentages. We have been now saying that we have to grow in a market. That's what it is. The initial belief which we had is when more and more competition is coming, the whole segment will grow, and in the process, we'll also grow in that. The whole segment, I think others are not able to grow the market, so the leadership as Royal Enfield, we are continuing to hold that responsibility of growing the market, which we are doing. Second, as we had talked about the gross margins and the absolute percentages, more and more, we will add value to the product to the consumers. That's what is the requirement now in the market.
As Batalion Black, when we launched, we launched it at an accessible price point because we really felt that it's required for us to take the market, which was not growing, which has really helped in the way we thought. It has really grown almost about 22% over the previous year because the product was conceived right, it was positioned right, the pricing was right for it, and it has really helped us. Similarly, Classic 350, when we came out with the refreshers, we passed on only the cost, but we added value more into the product, not the absolute profit percentage, which we are not looking at. Hunter, as of now, with the refreshers, we have taken a price increase, but may not be to that level of the profitability.
What is more important, which we have to look at is now value engineering will start kicking in for all these platforms, and that's the direction which we are working on, on improving even the profitability. That's a directional thing.
No, team, I think volume focus is the right strategy. And just on OBD, if you could give the cost, that's it from my side. Thank you so much.
OBD2B, the cost increases for all these products. First of all, OBD2B, we have transitioned seamlessly. Not that we had excessive motorcycles of previous versions and all those things. You all know every time when there is a statutory thing comes because we are a retail-focused company. We do not build inventory into the system. That makes sense. We did not have much of an issue in the transition. Whatever the cost increase which had come up, we have added up into the product and we passed on.
Great. Great. Thanks, team. Thanks for that.
Thank you. The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi, good evening, and thank you for taking my questions. My first question is just on your outlook for FY 2026 in the domestic Royal Enfield, exports Royal Enfield, as well as the VECV businesses. I think last year we had started the fiscal year with expectations of 10% volume growth for the premium motorcycle category, and I think we were able to deliver slightly higher than that on the full year. I just want to understand how you're thinking about premium motorcycle category for FY 2026 and with your product launches, Hunter 350 plus, looks like you have a few more on the way. How do you think about Royal Enfield prospects in the space and VECV, etc.?
Yeah. Let me just close on the two-wheelers, then Vinod will talk about the VECV. Financially, 2025 has been good for us in the growth. We have crossed 1 million motorcycles, which is in the history of Royal Enfield. And a company which was almost about a decade back was looking at only about 100,000 motorcycles in one year. We have crossed 1 million. We grew the market, and the growth primarily came from the focus of delivering the pure motorcycling experience to the customers. With the motorcycles which are very differentiated and look wise and fit and feel wise, it has to be very differentiated. That is what we have been consistently working on, which has really helped us to grow the market, where we are almost about 88% market share in the middle weight.
Our focus is also continued to be in the middle weight, and that's where more and more product we launched, and we'll continue to have products coming up, refreshers coming up even in the year. What's happening in India, which we would like to talk very openly about, that is last year also, the rural market has been very good, and the urban market growth has not been so good. It was slightly muted. This year, with the tax cut, especially on the income tax cut, we expect the rural, sorry, the urban growth will start coming back. We are seeing the positive sentiments at least now, even in the month of April in the urban market. Rural market has continued to grow. That way, premiumization is continuing.
Mid-size, we have been growing with a lot of the motorcycles which are going to come and which has already been launched. Our expenses which we have been putting behind in the marketing activation, we do see even in the coming year, the growth will be good for us. That is on the domestic. On the international, you also asked, Chandramouli?
It's the international and then VECV as well.
Yeah, yeah. International, this is the first year we also crossed about 100,000 motorcycles. It's backed by solid retail in all the markets. We are number one in the U.K. in the middle weight, number two in the Argentina market, and number three in the Brazil market. Brazil market is opening up. During this year, we also entered into the new market, Bangladesh, which is showing very good signs for us. Over the years, we have been developing the brand, building the riding community and the events. Of course, with the motorcycles, we are actually the top four mid-weight motorcycle brands in many countries across the world. Even now, the international markets, whether the sentiment is so, so strong, it is not that way. As I mentioned last call also, we are cautiously optimistic about the international market. Our retail has been good. Our interest on product has been good.
In fact, we launched the Himalayan in Brazil very recently because it takes time for the entire homologation cycle. There's a huge reception for that product in the Brazil market. When the product is hitting into the market, the market is ripe, and we are going to work on brand building in a very different way. That's how we feel that the growth is going to be very good. With the tariff situations, I'm sure some of you will be looking at what's that scenario, how we are handling it. In some of the markets, especially U.S.A., we do have a stock to overcome the riding season at the pre-tax level itself, pre-tariff level itself. We are continuing the exports as of now. We do see even in the export markets, the growth will be very good.
What we are doing backend to get the export market growing in the long term, I think that's where the focus more and more which is. Now, probably VECV, Vinod can add.
As far as VECV is concerned, as we have seen last year, we have grown by 5.3% as against a flattish market. If you see all the segments, we have grown in all the segments. Our market shares have grown in all the segments. Of course, this is based on our continuous expansion of our distribution network. We are present in more and more territories. We are penetrating more and more into the distant markets of Eastern sector as well. Of course, we are also opening more of the company-owned dealerships in some of the difficult locations. Therefore, all these steps are helping us to improve our market share. Going forward, we are expecting that the market will continue to do better because the economy is growing, and it is expected to grow this year also 6.5%. Replacement market is expected to remain strong.
Infrastructure investments are expected to remain strong. Therefore, the fundamental factors are all in place. Now, of course, there are always some hiccups here and there because of sentiments or because of, for example, if this recent war, which was there, this would have dropped down the sentiments. Similarly, if there are some other such factors which drops the sentiments, but that brings down the demand only temporarily. On the fundamental factors, the market will continue to remain strong and will continue to grow in the short to medium term. Got it. That's helpful. My second question is on just a couple of data points. If you could share the full year export revenues as well as the non-motorcycle revenues, please.
Full year what?
Export revenue.
Yeah. 13.5% is our share of international market, and non-motorcycle full year is close to 15% for domestic and international put together.
You said 15% for non-motorcycle?
14.8% for both domestic and international put together for non-motorcycle.
Got it. That's helpful. Thank you very much .
Yeah.
Thank you. The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.
Yeah, hi. Thanks for taking my question. I just wanted to go back to the margin question. There were two things that we spoke about last quarter. One was this EV unveil and a lot of events that we had bunched up last quarter, right? If I roughly remember, the number was some INR 60-70 crore. I'm just trying to understand, was there anything specific, such sort of events which were there in this quarter that we did not see any reduction quarter on quarter on that front? Also, if you can talk about this INR 19 crore liquidation expense that you spoke about, what does that pertain to?
Gunjan, if you recall my last quarter, what I said was that we had the increase of 70. Some part of it is because of one-off. This time, when I mentioned it earlier in this call, what I said is there has been a INR 30 crore reduction of marketing spend versus Q3, which is really the spend that we had, the event and launch related expenses, which we had in Q3, which we did not have in this particular quarter. The INR 19 crore is because of there are some distributor and liquidation settlement expenses, etc., pertaining to that.
Okay. Yeah, I'm just directionally trying to understand. There is clearly, it's good to have the growth back, but I'm just trying to understand how should we think about this line item because there has been a pretty big step up. Is it that we do need to do a lot more in terms of the marketing interventions, or you think now we're at that steady state of marketing interventions and it's more about bringing refreshers, etc.? I mean, just some color, how do we think about this line item?
Yeah, Gunjan, it can't be static, first of all, because we always have to look at the funnel. What we look at is every month, we'll start looking at what's the kind of an inquiry, what's the booking, what's the conversion. Also, on the brand track study, we have to triangulate it and then see where we need to spend money. All the new brands like Guerrilla and now the new Hunter with the new colorways which we launched, all those areas have to be continuously on the brand building exercise and the market activation. Will we do like what we did last year? May not be. Will we not do like last year? We may have to do it depending upon how the brand track is actually showing us. Is that yes, some area you have to do a marketing activation to grow?
Because growth is one driver, and everything has to actually work around that. That is why we always say that do not look at the absolute, do not look at the percentages, look at the absolute value because that is how the growth in an organization can get propelled.
Okay, got it. Just on the Hunter, the refresh that you've made, can you just talk a little bit about what is it that we're trying to target here? Because there were clearly agendas set with Battalion Bullet, bring the retro look back. What is it that we're trying to do with this and our expectation in terms of what it does to the brand, given that it's been at 15,000-16,000 units per month run rate? Are there white spaces that we're, in terms of geography, we are trying to plug? Some thoughts around what are we trying to get with this refresh?
Yeah. Within Hunter, we launched in August 2022. The thought process at that point of time was when we launched this product, it has to get us a new set of customers. There should not be cannibalization into the Classic. That is the primary thing which we went in. It has really helped us to get almost about 15,000 numbers, average of about 14,600 numbers. Over the years, we have crossed, we all know, about 500,000 Hunter sales from August 2022. What we set out, it has done well. We also saw, as I mentioned in our studies, the growth is muted, and it has very good potential. We went to the market, and we are trying to understand what does it require for doing more.
We could see that we have to do a bit more brand activation, sustenance activities for the product, and also product intervention. That is why on the product, if you look at it, it is for a city condition usage, tight traffic conditions. We wanted to bring in a slip clutch, which we offered into this, ride comfort, which we have increased, and ground clearance slightly we have increased in this motorcycle. We have brought in LED headlight into this. Tripper pod is added. USB charger is added. New color variants are added. Why are we doing all these things? It is primarily because there are young consumers who are looking at it. Now the marketing activation for Hunter to be towards a younger audience to make it cool and vibrant and youth-focused brand, Hunter. That is where there is a focus which is going to be for the coming year.
That's why we came out with the refreshes with all the feature additions. The next growth phase which has to kick in after our activation starts in Gunjan.
Okay. Got it. Just last clarification on the tariff. Did you mention, I mean, anything? How does it affect our North America exposure? Any sense that we have? How should we be thinking about that?
Two things. First is because of the tariff, okay, initially there was high, then 90 days break, and there is something which is going back and forth. As I mentioned for the riding season, first of all, we are protected with an inventory which we were having there in our warehouse at Dallas. To that extent, the season was not missed. It is also pre-tariff rate. We are not changing the MSRP at North America. Now that the tariff situations are being discussed, we are watching it and correcting the FOBs and all those things so the MSRP is not altered much for our consumers.
Okay. Got it. I'll join back with you. Thank you.
Thank you. The next question is from the line of Kapil Singh from Nomura. Please go ahead.
Yeah, good evening, sir. I just wanted to understand your thoughts on the growth profile of the market. If we make two broad buckets, 350 cc and above that, when you look at growth, there is some increase in mix for the 350 cc. When you are looking at things going ahead for the next, let's say, two to three years, how do you see that? Any factors here that you would like to share as to why the 350 cc mix has gone up? Because 650 also, we had, or 450 also, we have had good launches. The base is low, so the growth would have been higher there as well. Any thoughts there?
Look, I think at 350 cc, we came out with a lot of products during this year, as even in 650 cc and in the 450 cc, the Gorilla which we launched. Everywhere we have been looking at products which have to come in, which give a differentiated experience to the consumers in the white space. We constantly look at where is the space and what is it we can do. Every product has been given different experiences. If I have to tell you about the 350 cc segment, and that's a segment which is almost growing, and it has given a growth for us in the last year. In the 500 cc plus segment, we are almost, what, 95% plus. That's where our strong position is.
We do have products which are there in all those CC segment with the activities which we are doing around the community marketing and with the refreshers which are going to come even in this year. Finance availability, all those activities is what we feel that the growth is going to continue. The fundamentals haven't changed, right? The premiumization is continuing. The money availability in the urban market is going to be better. Rural is growing. When the whole two-wheeler market has the positive sentiment, normally the premium motorcycle sales also goes up. That's the trend which we have always seen, and that's the positive trend which I'm seeing even now.
Okay, sir. Do you see the mix shifting towards 650 or 450 over the next four, five years, or you don't see any significant change?
Look, I think the percentages which they are actually at a stage. So the percentage of growth may be very different because the base is so low. I don't see that 650 to 350, there is going to be a complete switch and flip which is going to happen in the next two, three years. Wherever the growth is happening, our products are there, and we will continue to have more products in those areas. That at least we are there in the consumer's mind that when they see that I need a product at a particular CC level, Royal Enfield product is readily their size.
Sure, sir. And sir, one question was on the CapEx plan. If you can just give us an update, how many new launches we are planning next year? We had, I think, six last year for Royal Enfield. And in what all areas will the CapEx go towards? And one housekeeping question just on the commodities, if you have any outlook to share and any pricing changes that we have done. That's all from my side.
That's all. I expect our CapEx to be between INR 1,200-1,300 crore next year, which is largely towards investment in EV manufacturing facility, product development, and new listing. I think as far as the launches are concerned, we'll get into specific items about the launches closer to the date of the launches. Though, of course, we've said that as far as EV is concerned, we've talked about the timelines publicly. I think the other question you had was about.
Commodities.
Commodity prices. I think we are seeing volatility, and I think we've talked about 0.2% that we've got it back because of steel and aluminum prices as far as the current quarter is concerned versus last quarter. We are waiting and watching to see how it kind of plays out. At the moment, there is a lot of volatility happening, as you know. It's difficult for us to comment. We'll keep you updated in terms of impact in the coming quarter.
So far, there's no pricing change?
Pricing change, as we've said, we've taken about a 1.15% increase in some specific models in April.
The April itself, okay. When the OBD2B transition which was coming up, and then the New Year was starting, we have taken that. If you remember last year, full year, we said no price increase because we wanted to add value to the consumers. That continues. This year, as Vidhya is mentioning, we have taken 1.15% in select models in month of April itself.
Thank you so much, sir. Have a good.
Thank you. The next question is from the line of Raghunandhan from Nuvama Research. Please go ahead.
Thank you, sir, for the opportunity. Congrats on strong volume performance. One clarification. Within the gross margin on a QoQ basis, you indicated that, Vidhya ma'am, you indicated a 20 basis point provision relating to few old bikes. If you can just expand on that. That's a one-off, right?
Yeah, that's a one-off.
Understood. My first question was on Classic 650. Given the strong umbrella brand of Classic, how do you see the potential for that model going forward, and how has been the response so far?
I hope the response is too good. I mean, we are very happy with the way consumers are looking at. Honestly, we are looking at, will that be the trigger for our upgrade cycle? Because the initial responses, the consumers who have been having Royal Enfield, who bought the Royal Enfield 350s maybe about eight years back, ten years back, they all started looking at Classic 650 as an upgrade model. In that case, the interest is very good. It is just two months. It is in the ramp-up stage. We will wait for another two, three months to see how it is really performing. It has a huge traction even in the international markets.
Got it, sir. Considering the strong volume performance, what are the plans to expand capacity? Currently, our capacity is 1.2 million units, and there are months where we are very close to hitting the full capacity. How do you see the expansion? How much expansion are we planning?
As I always mentioned, Raghu, our capacity, as you mentioned, is about 1.2 million with the plants. We also have Cheyyar where we protected the land, and we also have the sheds ready. All our manufacturing facilities are done in a modular way. What we are looking at even in this year, as Vidhya was mentioning about the CapEx, some CapEx goes in. Wherever there is a capacity enhancement which has to be done, we will be using it, and we will take the capacity up for the new models which we launched.
What would be the capacity at Cheyyar, sir?
Cheyyar is actually a plant which will support from the back-end operations like chrome plating, powder coatings, and all those things, surface finishing for all Vallam and Oragadam plants. That's how it is envisaged as of now.
Understood, sir. On the export side, what would be the share of global CKD plants in overall exports? How are you looking at capacity addition in these global plants? For instance, in Brazil, you are actually increasing capacity because of the strong demand. If you can talk about that.
Yeah, yeah. Brazil, you all know, because of the tax structure, unless otherwise we have a CKD operation, we can't enter into the market. As a CBU, we'll only be losing money. We also put our expansion on hold because the CKD facility has to be ready. Having said, CKD facility with the third party also has a particular quota. They also don't have unlimited numbers which they can produce. Initially, we worked with the third party. Now we have added one more party also so that the year's requirement is done. Parallelly, we are also evaluating what does it mean for us to be of our own and what's the kind of an investment and what's the capacity which we have to build. Brazil is a very good market which Royal Enfield products are getting accepted very well.
We are already number three in the Brazil market. Last year, we have made almost about 22,000 and odd numbers in the Brazil market. That market is receiving products from Royal Enfield very well. As I mentioned, we launched the Himalayan just about a month back, and the reception had been outstanding. It is an important market for us, and we are committed to invest and build that market.
Got it, sir. And just lastly, on the dividend payout, the payout has increased, and we are closer to a payout ratio of 40%. But compared to a couple of other two-wheeler mass market companies, our payout ratio is still on the lower side. How do you see that increasing over the next few years?
Sir, would you like to?
I think we had been, if you look at the past track records, we had been consistently paying out around 33%-35% sort of the dividend payout. This year, we have improved it depending on our better performance. Going forward, also, I think we will be open at looking at what is the right payout ratio based on the performance and the cash situation. I think this is a good improvement over the previous year which the board has considered and given that payout.
Got it, sir. Thank you very much, and wishing you all the best.
Thank you.
Thank you. The next question is from the line of Amyn Pirani from JP Morgan. Please go ahead.
Yes, hi. Hi, sir. Thanks for the opportunity. On VECV, a request as well as a question, given the increasing importance of this business and the way it has been improving its financials, it would help if we can also get some broad cost hedge like raw material, employ, and other expenses instead of just revenue and EBITDA and PAT because the kind of improvement that it is showing, it will help us to get a better sense as to how things are going there. The question is that after having flattish margins for a while, in the last two quarters, we've actually seen significant improvement in margins. Any broad sense as to whether it's driven by gross margins, whether there is some operating leverage playing out in other expenses, is your pricing momentum vis-à-vis competition improving? Some color there will be very helpful.
No, first of all, I think our financial statements are part of our accounts. So you get the full details there on the material cost and the part of the accounts, no? Annual accounts?
Annually, yes, sir. Quarterly, we don't get. Annually, we definitely get that. You're right.
It can be given if you want. I think that's right. It can be given. I think Anubhav can share that. That's not a problem. As far as the margins are concerned, it's a, I think, combined result of better price management, operating leverage, as well as cost management. There is a consistent focus on improving the transaction prices and reducing the discounts and also taking the pricing phases wherever it's possible and also getting to better product mix, focusing on those products where, of course, the margins are better. I think this is the result of the consistent focus, and we would like to continue that same focus. Let's hope that we are able to maintain or improve these margins further.
Okay, that's good to know. Sir, just to follow up, obviously, 4Q is a seasonally strong quarter for the industry. I'm guessing that maybe we should not extrapolate the 4Q number into a full year. Any broad indication, do you have a target of when should we see a double-digit EBITDA margin for the business on a full-year basis? Is it something that you're expecting in the near term, or is it something that could take some more time?
I think it will be difficult to give the actual guidance on that. Of course, you have the quarterly results for all the quarters. You can see the things are improving, and let's see. I think that will be the effort. I can't give you the exact numbers and how it will go. It's very difficult to predict.
Sure, sir. Thanks for that, sir. I'll come back and thank you.
Thank you. The next question is from the line of Sanjay Satapathy from Ampersand. Please go ahead.
Yes, sir. I couldn't understand whether this gross margin that you are talking about, a 20 basis point negative impact, can you just explain what exactly it is?
Which one? What are you referring to in the three pieces? Is that what you're talking about?
The gross margin, it seems like there was some 20 basis point negative one-off. I couldn't understand that part clearly.
Basically, because for some of the, so it was essentially some inventory provisions that we created against old bikes, etc. That is what it was around. If you want, I can give further details separately.
No, is it like a regular year-end activity, or it was something special for this year?
Bikes, etc., where we cleared up some of the old stock.
Understood. Thank you so much.
Thank you. The next question is from the line of Sonal Gupta from HSBC Mutual Fund. Please go ahead.
Yeah, hi. Good evening, and thanks for taking my question. Sir, I just wanted to understand, right, our previous peak was maybe in FY 2018-2019, if I recall correctly. Since then, of course, we've crossed, and I just want to understand over the last six-seven years, right, at that time, Classic used to dominate the volumes. Now, our volume mix is more diversified as well on the domestic side. Could you give us some sense of how the customer profile has really changed? I mean, how do you see the customer profile, I mean, some sense on the customer profile today, really speaking, and what would be the share of top 20 cities in our overall volumes?
So please stay connected. Just give me a moment. Ladies and gentlemen, thank you for patiently holding. We have the management line reconnected. Over to you, sir.
Hi. Good evening, sir.
You have turned the queue.
Hello?
Yes, please. Go ahead.
Please go ahead.
Yeah, yeah. Thanks. Thanks. Good evening, sir. Thanks for taking my question. Just, I mean, versus last peak in FY 2018-2019 to now, we've crossed to a new peak in the domestic market. I was just trying to understand, I mean, versus over the last six, seven years, how would the customer profile have shifted, right? At that time, Classic used to be really the dominant part of our portfolio. Now, it's more diversified as well. In terms of, I mean, just trying to understand, I mean, whichever ways you want to segment the customers and how are you looking at the profile now, already speaking in terms of, I mean, age mix, income mix, anything that you can give?
Yeah. At that point of time, when Classic was their product, single pony, which was pulling the full company, at that point of time, the people who were looking at average age would have been almost about 38-40 types. Over the period, we have added products, which has actually brought the average age of Royal Enfield customers lower. Under when we launched, it actually brought in at a mode of about 24-26 years as the average age. Meteor, when we brought in, that also brought in the younger audience. More and more, what is happening is the younger audience are coming in. The average age of the customer profile of Royal Enfield has drastically come down. This is a good sign because that is where the growth is happening.
Our first-time buyers has also increased almost close to 19% of the young guys who are looking at. All our products, which are now targeted towards more and more younger, youth, cool, that's where the products are coming. That's where the traction is. That's how the average age is also coming down. Some products, maybe Classic 650, if I have to talk about, that won't be at a very young age. Obviously, the average age will be higher because that's a product which is fishbowl in a way as an upgrade product for people. There, the average age will be slightly higher. If I have to give you some numbers, around 30 plus percentage of the consumers are below 25 years as of now, kind of overall aggregated level. That's product level we have to see.
Another about 60%-65% will be about below 35 years of age.
Got it, sir. Sir, would you give us a sense of what sort of medium income level would be there for the customer?
Very difficult because we always believe the product and the brand has to be. The guy who's actually sitting in the car and the guy who's driving the car both should aspire to own a Royal Enfield. It has to be at an accessible price point. I can tell you in other ways, maybe we'll do a bit more cutting and send it to you, is that our finance penetration is also going up. It is almost now about 61% is our finance penetration, which is also showing there is a good traction for even the younger audience.
Just lastly, how much would be our, I mean, how much would top 20 cities be of our volumes now?
Around top 20 cities will be about 18%-20%, 22%. That's the range.
Got it. Got it. Great, sir. Thank you so much for answering the question. Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you very much. It's been wonderful talking to all of you guys. As I mentioned, Royal Enfield, both at VECV and at Royal Enfield at the Eicher level, we are focused on what we need to do for building the future growth. We are confident with the current market situation and the kind of product which we are having at Royal Enfield and from VECV, our growth is in the right track. Thank you very much for joining this call.
Thank you.
Thank you.
Thank you.
Thank you. Thank you. On behalf of Avendus Spark , that concludes this conference. Thank you for joining us, and you may now disconnect your lines.