Good evening, ladies and gentlemen. I would welcome to Eicher Motors results call. I would now like to hand over the call to my colleague, Basudeb, to make the introduction for management. Basudeb, over to you.
Thanks, Divya. Thanks to Eicher Motors management for giving us the opportunity to hold the conference call. We have with us Mr. B. Govindarajan, CEO, Royal Enfield.
Thank you.
Mr. Vinod Aggarwal, CEO VECV, representing the management. Today, Mr. Govindarajan will take us through Eicher Royal Enfield related discussions. Over to you, sir, for your initial comments.
Thank you, Basudeb. Hi, everyone. Welcome to Eicher Motors Limited call for the second quarter financial year 2022-2023. I hope all of you are doing very well. Glad I've had the chance to meet some of you in the investor call very recently, which we had at Chennai. With regard to the performance of this quarter, I'm very happy to announce that we have had an exceptional quarter. As we have reported our highest ever revenue from operations and highest ever profit after tax. We are continuing to achieve our milestones both at Royal Enfield and at VE Commercial Vehicles. At Royal Enfield, we started this quarter with a spectacular launch of the all-new Hunter 350 on our well-refined J- series engine platform. We did it at Bangkok with all the global media.
It has a huge reception. Very recently, two days back, we also launched our Super Meteor 650 on the twin platform at EICMA in Italy. I'll talk you through about these in details over the period of time. The festive season in India has brought in a very strong sales for Royal Enfield. We are very strong and have recorded more than a 30% market share in H1 for more than 125 cc. In line with our broader vision for sustainability, we announced a unique and interesting partnership with UNESCO in August, wherein we'll collaborate with them to promote and safeguard the intangible cultural assets of India, starting only at Himalayas first. Our ambition is to partner with at least 100 Himalayan communities to adopt sustainable living practices by 2030.
We are very proud of this partnership, in the overall at an Eicher Motors level. At VE Commercial Vehicles, we continue to focus on strengthening our market share in the heavy duty trucks and buses segment. Mr. Vinod Aggarwal will talk us through about that at a later point of time. Overall, at Eicher Motors level, we continue to maintain a razor-sharp focus on our future strategic growth plans along with the robust ESG vision. I'm here later to share that we have improved our proportion position in the Dow Jones Sustainability Index, second year consecutively. We are now among the top ten in the emerging markets category. To conclude, at an Eicher Motors level, we are very confident that we are on an accelerated growth path. Moving on to the financials.
Our revenue is about INR 3,519 crores for Q2, which is our highest ever quarterly mark. Up by about 56.4% from INR 2,250 crores last year. Our EBITDA is about INR 222 crores, up by 75% year-on-year, against about INR 470 crores last year. This is only marginally below our highest ever mark reported in Q1 of this financial year. PAT stood at about INR 657 crores, which is the highest ever for EML, up by about 76%, on YoY basis. As against about INR 373 crores reported last year. Now, I'll talk you through something about what has happened as a highlight in the Royal Enfield.
Royal Enfield has an exceptional quarter in Q2, and we have accelerated our growth momentum. That's what we briefed you when we were there in the investor meet also. The first of that particular product, which has propelled our growth is the Hunter 350 launch. The consumer response and from the media has been outstandingly well. Everyone now start looking at the inquiries are going up, bookings are going up. That's a very good sign. We wanted that this has to give an additional volume to us in overall, and it has exactly landed in the positioning which we wanted for the product, which gives us an additional volume for those consumers who were looking for a Royal Enfield motorcycles in a different format. Hunter answered it bang on onto that area.
We have rolled out on the Hunter more than about 55,000 motorcycles already, since the launch, which we did in August. Our order books are very good. It is very healthy. It is growing. You know, Hunter, we wanted it should get new consumers from the new geographies, and that's what is the initial thought. It should not cannibalize something in our product. We are seeing that positivity, that it is not cannibalizing, and it is getting us new consumers, first time buyers, the guys who are really enjoying the motorcycles, who are looking for a Royal Enfield apt motorcycle has got addressed through this Hunter. We have just opened it only in India, till now. In the month of November, we are opening in APAC.
Subsequently, it will be to EMEA and to and all other areas in the markets. It's the Hunter is also ramping up now, so to that extent, we'll start opening up the market. As I mentioned, it is a J- series, which is the overall, it's a Euro 5 compliant. It is a global product. That's how it was envisaged, that's how it is landed. Anywhere it can go, we don't need to wait for some more homologations and all those things also, which are done and tested and is ready so that the vehicle can be exported as of now. On November eighth, or two days back, we unveiled all new Super Meteor 650 at EICMA in Italy.
We have seen very exciting initial feedback from the media and from the community who has been seeing this. This call is full. Everybody is now looking at and asking a lot of details on this. The Super Meteor 650 is an authentic, retro thoroughbred cruiser, and on a successful 650 cc platform. We have a lot of learning and legacies of the cruiser making. 1950s, we were making cruiser and then exporting to United States. The Meteor has actually taught us a lot more in cruising, what is it has to be, what the consumer wants.
Super Meteor 650, which has been there in the thinking and making for the past three years, is when we launched and exactly the media came back and then said that's the very accessible, simple, easy to handle Royal Enfield looking, retro styled cruiser. We're looking forward for a great success even in that particular product. For the quarter, we sold about 203,451 motorcycles, which marked about 65% growth from 123,515 last year. Sequentially 9% growth over the previous quarter. At domestic volume, we sold almost about 183,067 units during the quarter in India, reporting an increase of 73% YoY, and a growth of about 16% sequentially.
The festive retail feedback from the field has been very strong, and we recorded our third largest festive retails during the September-October window. Our international market, we continue to progress on our mission of becoming a global motorcycle brand from India, on a YoY increase of more than about 14% at 20,384 units. Again, 17,900 units in the previous year. International retail performance for H1 has been very robust. We have got a solid growth of almost about 40%-55% across various regions. RE is now the leading midweight brand in the U.K., and among the top three in Europe. It's a proud moment for all of us when we were reaching that market share position.
Our market share have climbed up to 7% in America as of now, and 9% in APAC, and about almost 10% touching in EMEA region, backed up by robust pipeline of new products which we are launching. This all is without a Hunter, which was there, because Hunter will open up the entry level even in an international market. As far as the retail network expansion is concerned, we have been steadily moving ahead in our domestic network expansion. We have a network of almost 2,130 retail outlets. 1,083 dealership outlet format and about 1,047 studio format. In international markets, we continued expansion with an addition of another six stores, exclusive stores in the Philippines, Mongolia, Vietnam and Thailand.
Because we are slowly opening up one by one all the markets. As we are always saying, as a brand, we always wanted to be a full brand. Go there, open one showroom, make the product experience and people start feeling the product, and that's how the experience will start building the brand. Then we will go in for an expansion. That's the phase we are entering. The expansion phase which is taking place. As of now, totally we have almost 710 multi-brand outlet and about 175 exclusive stores outside India. That expansion plan is continuing with the new products which are coming out. The expansion also will go on in that sequence.
As far as the motorcycle and ride events, we did the eleventh edition of One Ride, where Royal Enfield enthusiasts across the world gathered to ride that One Ride on a particular day. We also kickstarted the Royal Enfield Continental GT Cup, we did last year and this year also. It's been getting received very well by the young guys. There's lot of traction which we are seeing that for this sort of racing. As it's not a true racing motorcycle, but it gives a fun type of retro racing. It's a sports, and that's actually getting a traction in the GT Cup through that route. Before I conclude, I would like to share another an achievement from Royal Enfield.
In the dealer satisfaction survey which was conducted by FADA, we as Royal Enfield emerged as the second runner-up, which compared to last year it was a fierce change which is there. The dealers also started looking at the growth is coming back and things are better. Our connect is becoming better. Overall this quarter has been an outstanding one at an H1 level. It's been a record growth for Eicher Motors and at Royal Enfield also. Now I'll hand it over to Mr. Vinod Aggarwal to walk us through the VECV financials and updates. Over to you, Vinod.
Thank you, Govind, and good evening to all of you. Let me first start with the giving you an update on the commercial vehicle industry. If you look at the CV industry, as you all know, after three years of recession, the CV industry is on the growth path and it's continuing to grow every month. First six months have been very good for the industry, where the industry 3.5-ton and above. It has grown by 68%, and even in the month of October, the growth has been 15%. Based on this growth, of course, it is expected that this year we will make good progress for the overall industry.
Even though we may not still touch the earlier peak of 2018, 2019, but in some of the segments, it might be new peak, like for example, in 5-15 ton trucks, it is likely to be new peak. Even though in heavy duty and in buses, still it will be away from the earlier peak. Of course we have also seen in the past that whenever the recovery happens after the recession, it always leads to a new peak in two to three years. Therefore, this time also, I am of a very firm belief that we are likely to see a new peak in the coming two-three years.
Of course, there are headwinds which are there, which are coming from inflation and global situation as well as interest rates. At the same time, I think the outlook for the Indian economy, for the current year, as you all know, it is 7%. Future also relatively is much better than the global markets because of our own situation in the Indian markets, because of our dependence on the domestic consumption, even though there may be impact on exports. We also experienced a similar impact in our export markets. Like the truck export markets, we are having many headwinds because of the global situation, especially the foreign exchange situation of some of the South Asian markets, like Bangladesh, Nepal, Sri Lanka.
As a result of that, the markets there are down because there are a lot of import restrictions in those countries. Nevertheless, as I mentioned, the growth for the industry is good. Even in the month of October also, we have seen the industry growth of 15% as compared to October of last year. As you all know, last year, the second half itself was a much better year and with a good base. With a higher base also, we have seen the growth of 15% in the month of October. Now, in line with the industry growth, we continue to also grow in VECV.
Specifically, I think the highlight has been our good growth in the heavy duty truck segment, where our market share in the first six months both Eicher and Volvo put together, Eicher and Volvo trucks, is now 8%+. We are at around 8.2%. For Eicher brand itself, it is around 7.5%. As you all know, this has been our one of the biggest objectives that we should grow in the heavy duty truck market, because heavy duty truck market is very large. If we start growing in that, then of course, the potential for VECV in heavy duty trucks is going to be much, much stronger in the coming years. Then we are also growing very well in buses.
Buses, our market share in first six months is now reached between 24%-25%. That is again a very good growth as compared to the previous years. In the light and medium duty truck segment, we continue to maintain our strong position of 28%-30% market share. Our strategy is to sustain that strong position while slowly and steadily growing in the heavy duty trucks as well as the bus segments. Now coming to our financials. Our revenue for quarter two this year, including the other income, it is INR 4,215 crores as against INR 3,152 crores last year. At a 34% growth in the total income.
First six months, it is INR 8,148 crores as against INR 4,792 crores in last year first six months, with a growth of 70% in the top line in the first six months. As far as EBITDA is concerned, this quarter two, our EBITDA is INR 249 crores, which is 6% of net sales in the previous year, quarter two. First half year, our EBITDA is INR 467 crores at 5.9% of net sales, as against INR 188 crores at 4.1% of net sales for the first half of last year.
Our profit after tax this quarter has been INR 81 crores at 2% as against 17 crores, 17, at 0.6% last year quarter two. First half, our PAT is 1.8% as against loss in the first half of last year at 1.3%. In spite of very strong competitive pressure, as you can see, we have continued to show good performance in financials and with a good potential to grow. Relatively, we are doing better as compared to the competition as far as the margins are concerned. Of course, we have also last quarter another highlight has been introduction of our electric buses.
We have just executed 40 buses, electric buses order for Chandigarh city, which are running very, very successfully there. We also launched new models in the buses, both in the Volvo bus and Eicher bus range, sleeper coaches, which are again state-of-the-art buses. We also introduced left drive trucks for the export markets and also new bus models in the export markets in the Middle East. Another good recognition for VECV has been the second year in a row we were rated as number one in dealer satisfaction in the survey conducted by Federation of Automobile Dealers Associations, FADA. We continue to be number one this year as well as we were number one last year as well in the survey.
Which puts us in a good advantageous position to create good customer satisfaction. All in all, I think we are in a good position and we are doing very well as far as the volumes are concerned. We should grow with the market and of course, the financials also should grow in line with that. With that, now, I think, I hand over back to Govindarajan for any last remarks.
Thank you, sir. Just one point is I'm just passing on Mr. Siddhartha's inquiry. He's slightly under the weather. He's not able to attend this. That's why me and Vinod are actually handling it and Eicher Motors. I'm just leading it on behalf of him. Thanks for joining. I think it's been a good quarter and H1 for VECV and Royal Enfield and overall for Eicher Motors Limited. Thanks for joining this call. Now I think we can move to the question and answers. Back to you, Vinod.
Thanks, Mr. Govind rajan, and thanks, Mr. Agarwal. Yes, participants, we can now start with the Q&A session. Requesting you to raise your hands or write your question in the chat box. We can start, the first question from Gunjan Prithyani. We request you to unmute and ask your question.
Sure. Hi, thanks for taking my questions. Sir, in your introduction comments, you mentioned that, you know, the Hunter has seen a different set of customers. Could you share a little bit of color on how the addressable market has changed, either in terms of, you know, the age profile or the geography? You know, a little bit more color around that. You know, what sort of order backlog wait periods are going on there, and is there a thought process to ramp up the capacity on the Hunter platform? That will be the first question.
Oh, hi. Hi, Gunjan. You know, as far as Hunter is concerned, the first time buyers, which used to be normally about 13%, that range, it has jumped to almost about 18.1%-18.2% in this year post the Hunter launch. In terms of first time buyers, if I have to talk about the existing Royal Enfield consumers to an Hunter is 26%. First time buyers is going up and upgrades are also coming up into this. What is Hunter doing and what is the confidence which we are having? I think during the launch also we were explaining.
This is a product for those consumers who love the brand Royal Enfield, and he wanted to associate with the brand Royal Enfield, but he wanted a motorcycle which is bit more accessible, slightly lower in weight compared to the motorcycles which we are having in our like Classic or Bullet. And it has all the ride and handling ability for a tight situations in a traffic level. That's where we were looking at, and it should get new consumers and not cannibalizing with the existing thing. Happy to share with all of you, the cannibalization is almost nil. Marginally will it be there because of the price point. Some people can take a decision here and there, but it hasn't been any materially different in terms of the cannibalization.
In terms of age group, the Hunter in this new format, it is the 18-25 age group is almost touching 40%, in Hunter, and about 26-30 is almost another 43%. It is more and more the younger audience who are coming into that. What we wanted out of the Hunter is exactly it got positioned in that particular form. It's adding volume, and it is adding the new consumer set into Royal Enfield. That's where we were looking for, which is Hunter has transferred to us.
Anything on the geography or, you know, also, you know, wait periods, order backlog, production thought process, if you can share on that?
Yeah, yeah. Hunter, it's a product now it is available pan-India. In terms of numbers, we have rolled out 50,000 motorcycles we have produced. To that extent you can see there is continuously it is growing. There is some waiting period. It is a healthy waiting period as of now. Not because of anything else. We anticipated both Retro Hunter and Metro Hunter. That's what we launched. Retro Hunter at about INR 1.49 lakh and Metro Hunter at about INR 1.62-1.69 lakh. That price point when we launched, we were assuming Metro, the Retro one, which is INR 1.49 lakh also, people will look at it. It's good for us as a company, and the consumer who is enjoying.
Now, the Retro, the percentage is very low, so the Metro is the highest. It's actually in an upgrade which is actually happening, which is a very good sign. That's what we were wanting to do. That has taken. What has happened is the exclusive part for Metro at an assumed level, we wanted to increase it so that the higher percentage of Metro can be given to the consumer. We kickstarted that activity looking at the initial responses. From November onwards, the existing numbers and Hunter per day also will slightly going up. It is very good in terms of booking, and it is constantly increasing the numbers for us.
Okay. The second question from me is on the export side. Now, you know, everybody's been calling out a lot of, you know, volatility in export markets given where the macro is. I mean, is there any slowdown that you all have seen? And how should we think about, you know, the exports scale up over the next 12, 18 months? Do we see any headwinds on that part of the business?
Exports, first, as far as Royal Enfield is concerned, I will just tell you, because even in the Q2, the retail has been very good for us. We have been gaining market share. In fact, some countries wherein the inflation is very high, to be honest, as in energy costs are so high in Europe and all. Even in those markets, we gained a market share, and we have almost about 10% market share in middleweight in those countries. Now Americas, both in North America and Latin America, our retail has been outstandingly good. You know, will there be a bit of a pressure point? Nobody can escape from the kind of an inflation and all those things.
What is promising to see, that's what we are at EICMA, when we are meeting all the European people who are here, when we are launching our B40 at that point of time we were discussing. The demand has not gone off. To that extent, everybody are looking at what are the new products which are coming up and when you will actually be bringing out the motorcycles. We somehow feel our motorcycle, which is accepted very well, continue. Maybe one month because of the cold non-riding season, the retail may be lower, but we are building up for the season coming year. To that extent, we will start continuing the production because that's what is our entire dealer network is also asking for more quantity.
All right. Thank you so much.
Thanks. Next we have a question from Pramod Kumar.
Yeah. Thanks a lot. Hi, Govind. Hi, Vinod sir. Congratulations, Govind, on Super Meteor. Looks pretty good. My first question is on the kind of or the discussion we had during the Investor Day as well, that incrementally you would like to focus on the absolute growth and the ROCE rather than kind of focus too much on the percentage margins on the EBITDA front. This quarter we have seen a bit of a step down on the margin and also on the ASP because of Hunter, right?
How should the investor community look at the margin profile of the organization, Govind, as you see Hunter ramping up, going forward, and then leading, getting into international markets as well? Because on the domestic front itself, Hunter is doing very well, and I'm pretty sure international markets also will be a big success for Hunter. How should we look at this in the context of ASP and EBITDA per vehicle, compared to the portfolio what we had so far, which was much more premium. If you can just help us understand that, will be great.
Pramod, Hunter as a product, when we wanted to launch it has been an addressable market at a price point which is also very accessible as a motorcycle. That's what we say. That's why we said we are growth focused now.
Yeah.
There has to be rebalance. That's the strategy which we looked at. That should be a rebalance between the profit and the profitability.
We designed when we launched Hunter, there were some headwinds also when we were launching that point of time, which is not as baked in. One was the commodity at a point when we were launching in the current level, immediately there is a lot of softening which is taking place. When we launch a new product, I always say that first three months, let's have a pipeline of VAV activities which are required, but we won't because it has to reach the consumer. The value proposition which we wanted to give it to the consumer, the first three months we have to actually look at whether it has landed to them very well. For us, the opportunity for the profit pool, on an overall number, anyway Hunter is bringing in.
On the profitability front, what we'll also start working on is through the commodity softening, which is helping us as a tailwind. As I mentioned, there is value engineering activity which we will be doing. Our CapEx is not going to be very high because as I mentioned, it will be incremental. For example, from the Metro Hunter to a Retro Hunter, ideally the platform, the number of components which we have changed and all, which is just about 1.2 crore additional investment here or there to debottleneck, we can actually move the whole product to 100% Metro Hunter. You know, even if that is what the market requires. That's a good sign. We assumed our profitability also with the Retro Hunter and the Metro Hunter at a particular percentage combination.
Now the Metro bookings up more and more, it's also a good sign. Because there is a demand which is there, we also increased the price, you would have known in the month of November, on INR 3,000, which we have done in Hunter. The pricing option is there. Commodity is going to help in a way which is there. What we are looking at is the growth, and there should be a growth for us, and that's what this Hunter is bringing in, and let's keep going in that. In that light, we'll start looking at profitability also parallelly and what is it we have to work on.
Govind, could you kind of guide from the current quarter levels, would you expect the percentage numbers and the EBITDA per vehicle to kind of improve as the benefits of commodity kind of come in and the price increases also kind of help you? Because, and what would be the sustainable profitability, what you would be quite happy with in terms of.
Pramod, as an organization, we don't guide forward guidance. We don't give a date.
Yeah.
I can only tell you as an organization, we wanted our growth focus has to come in. For growth focus, we wanted to bring in a particular product, and that's a Hunter. It answered our requirement. It actually started giving us a higher volume and not cannibalizing the existing one.
Number one, good Hunters in a way. Second is when there's no commodity pressures now. We are all assuming the severe commodity pressure that will continue for a longer period of time. That is not there. In between, we had our semiconductors and all those things. We were actually buying it from the reseller because, of course, price was higher, the logistics cost was higher. All those things are behind us now by and large. There is the value engineering, which is possible, which I'm just now kicking in the organization to say that let's start looking into one by one these things. But new product launches will come. Now there is a Super Meteor 650 which is going to come in. Initially I thought that probably we'll give it only in the first quarter.
Now it is coming up slightly ahead. In terms of mix, I see it, there is a positive trend of this organization as overall.
No, that's great to hear. Govind, follow up on the more of the industry terms as well. On the RDE norms, what would be because we are hearing that on the four-wheeler side, the cost implications will be big. How do you see that in terms of a cost for the two-wheeler industry, for a category like 350 cc and above, what ideally will be the cost inflation what we'll see on account of RDE norms or the OBD norms? Sorry, apologies. OBD for two-wheeler. Sorry.
OBD, it has two phases, Pramod. OBD-IIA and OBD-IIB. 2A is only a minor thing. IIB, when it comes up, that is what is catalyst deterioration monitoring which has to come in as close. IIB, when it comes up, that is when probably there may be a bit of loading in the precious metal possibly which can happen. Every one of us has started already working on if that comes, how do we actually protect it. For example, when we were doing a BSVI, after implementation of BSVI, we started looking at optimization. Now there is a time which is there for OBD-IIB. Very recently, in fact, it is in the final notification. It will reach us maybe in a day or so.
Now we know there's a precedent, so it will come through immediately. Once that comes in, at least we have a timeline for OBD-2B. It is only 2025. All our optimization activity which we may have to do, that can be done. That's the time window which we asked for from the government and government has given. Hopefully that should not put burden on the consumers also because of this.
Can I take one question with Vinod Aggarwal, sir? Yeah. Yes, sir.
Yeah.
Yeah. Sir, on the CV demand, we have seen some bit of moderation at the start of third quarter, and we got some feedback from fleet owners that they probably may be in a wait and watch mode, at least in February before they kind of get a color on the macro situation and the interest rate scenario. Given that, what are you picking up from the market in terms of the demand in the near term, sir, on the commercial vehicle side, and whether this global uncertainty and higher interest rates has resulted in some bit of a pause or a rethink on large fleet owners?
I think we have to look at the overall scenario because we won't be able to answer based on the month-on-month figures or month-wise figures. If you look at the overall scenario for Indian economy, I think everyone is having consensus that we are going to have 7% growth in the current year. Sentiments for India, they are relatively much better as compared to the global situation. If you look at our GDP, tax collections month after month, they are quite handsome. In fact, INR 140,000 crore. Plus if there are any concerns, they are largely on the trade balance concerns. There again, I think there are a lot of things which the government is doing on the on the ethanol mixing. 10% already has happened and 20% is talking of.
Therefore, I think government is trying to address all these concerns with respect to the global situation of the increasing crude oil prices. At the same time, when the economy grows, there is requirement for more and more trucks to move the goods and services. As you know, the three years have been bad years for the industry and it was at rock bottom in 2021. Therefore, since it is a cyclical industry and economy can't do without trucks. You also need more modern trucks to take care of the demands of more tax heavy customers or customers who focus a lot on the productivity as well as timeliness and the costs.
Like you should talk to any customer today, they always dictate that I need delivery in so and so and so period, and I need this cost. Now, if they have to meet these requirements, you can't meet those requirements with the old trucks. Therefore, it is imminent that old fleet of trucks have to be replaced. Since replacements have not happened in past two to three years, these replacements are going to happen not only because of the pent-up replacement requirement, but also because of the need of more and more productivity and cost reductions which can be delivered only by the new technology trucks.
Therefore, I would say that overall we are going to see good trends in the CV industry in the coming, maybe two to three years because we are in the recovery cycle and, still we are far away from the earlier peak as far as heavy-duty trucks and the buses are concerned. Light and medium duty still this year itself we may touch the new peak. My own feeling that we are going to see good time for the CV industry. There may be different indications in some months or the other, but that doesn't mean anything. Even in the month of October, the industry has grown by 15% over a much better base of October last year. Because last year, October itself, the industry had started growing and last year second half the growth had started and even on that base we have seen a growth of 15%.
The pricing continues to get better, sir?
Pricing will get better. As the industry grows.
Yeah.
Pricing will grow. As of now it is still not better, but you have seen a lot of press statements which are coming from competition that they are also concerned about profits, how long they will continue to show losses.
Thanks a lot, sir. Thank you. Thanks, Govind. Thanks a lot, sir. Best of luck.
Thanks. We'll request participants to limit their questions to two max. Next, we have Pramod Amthe. Please unmute.
Hi. Thanks for this opportunity. Since you touched upon OBD-II, wanted to check, the entry-level product still runs on the old engine platform. What are the plans to comply the same or all of your products can easily go for OBD-II?
This is , OBD- IIA and II B. and II BA is-
Sir, you have to put on mute because there is some background noise coming.
Yeah. All our products as of now for OBD-IIA we are ready. OBD-IIB we are working. As I was just explaining, for the OBD-IIB we have to be careful that it is not adding cost to the consumer and to us also. That actually we started working on and we have time for it. Time to come, the transition to OBD-IIA, we don't anticipate any problem. We'll be comfortably transitioning into that.
Second follow-up question is, if I had to look at your ASP rise, first quarter was pretty impressive, and once you launched a new product, it seems to have seen a sharp QoQ drop, and as a result of which first half, there's literally a flattish ASP. If I hear you right, you're already seeing a better product mix within the Hunter. If it goes down, do you see a further pressure on your ASP in the second half and hence you might have to take a more pricing action to drive a top line and margin expansion?
In the ASP, Pramod, once again, first this is growth focused. You know, that is what we actually said. It is a rebalance. It has to be a growth focused. We should get more consumers into this. We look at it as a business of holistic. One is about the motorcycle alone and ASP. If you actually look at the accessories, the GMAs which all get added on to that, when the Hunter was launched, in fact our GMA penetration has been slightly lower because we also have not brought it in time. We missed out. That is also going to come into this. Commodity is the way we priced it at that point of time. The commodity has not shown anything substantially and that we are expecting that it will come down.
The third which I mentioned is, as it is a new product, the value engineering project has not kicked in. It was all in the pipeline. We were envisaging, we were looking at, we have the whole host of activities which are to be looked at for the cost angle and all those things, but it will actually start from now on. Another one lever which is there for that is, the international market. International market as of now, the product hasn't come in, the Hunter I'm just saying, because we are just opening into country by country. Overall, as we wanted it as a growth, that's what it was meant for and it has given. Now when we look at ASPs, profitability, how do we work on it? Obviously the avenues and levers will be pulled whenever it is required and we'll be continuing on that path.
Yeah. Thanks a lot.
Next, we have question from Raghunandhan NL. Please unmute.
Good evening, sir. Congratulations on the unveiling of Super Meteor. Sir, I wanted to understand that there are expectations of multiple launches ahead at the 650 cc space. How would you look at the opportunity? Would export be a bigger opportunity or would you see these models as credible upgrades for domestic market? Which one would be the bigger area you would focus on?
Look, first of all, the cruiser, the entire cruiser in India, we had Lightning, City Bike, Thunderbird X, then we came out with the Meteor. We understand long-distance rides, we understand cruising, so we came out with the 350 Meteor cruiser, which is a simple cruising one. The 650 platform has come over the time when we were riding and we were also talking to our riding community. Everyone started looking at we should also come out with one more cruiser on that twin platform. When we were contemplating and conceiving the twin platform, at that point of time itself, we said the platform have to come with a cafe racer and a roadster and a cruiser. We came with Continental GT and with the Interceptor 650.
Globally, it has been a resounding success, and it actually created that category and grew the category in that particular segment. Now we see this is another one product which everybody has been looking for, not a very heavy cruiser. A guy who doesn't like cruising can also get onto the motorcycle, will enjoy cruising, and it should be so accessible and simple, not a complicated cruiser. Ours is a straightforward cruiser, but you won't feel it is a very heavy machine. So in the cruiser space, we feel there is a good space which we are entering. That's what our riders were looking at across the globe, and it is helping us in a right time, which we are bringing in.
When I was just unveiling it two days back and all the media when we were talking, all the European customers who are here now and when we are generally chatting, it's coming out to be very clearly that that's the product exactly you are looking for and you brought it in the fit, finish, in all those things. We will come back with a very good price point also in an accessible way so that across the globe that will also show us a growth potential. More products which are in pipeline for us to bring in for India are there.
As far as India is concerned, today, I think with the long roads which are coming up and the riding culture which is gaining momentum and post pandemic, once again, people are out there, weekend rides are starting, consumers started looking at. I can tell you now, people started actually asking me, "When is that? When are you opening the booking on the Super Meteor 650?" That's the demand which is coming up. Hopefully I will be seeing that both in India and outside. Both ways it will be addressing the easy cruising for even the non-cruisers.
Got it, sir. All the best for that. Sir, my second question was on how much was the commodity impact in second quarter? Because gross margin QoQ could be impacted both by mix as well as by commodity. Also commodity deflation impact do you expect from Q3?
Simple way, Raghu. Yes. In Q2 it hasn't impacted into the P&L to that extent. It will start going in Q3 onwards.
Thank you, sir. Would you be able to give some numbers, sir? How much benefit do you expect or going ahead?
Very certainly in the next call. Yes.
Thank you, sir, and all the best on the 650 side. Thank you.
Thanks. Next we have question from Jinesh Gandhi. Please unmute.
Hi. Am I audible?
Yeah, Jinesh.
Yeah. My first question pertains to the domestic market. Excluding Hunter, can you give some color on how our core portfolio is doing? If I look at the numbers on the wholesale basis, clearly we are yet to see material pickup in demand or a pickup in volumes on that side, from our normalized volume perspective. Any color on that?
Question is towards if Hunter is coming and all the other models are not growing, Dinesh. I can tell you this is a festive season anyway. All our models also has grown. It is also a good sign. On the booking trend, Classic, Bullet, Meteor, everything has actually gone up. What we are doing now is with the Hunter launch, every counter we are watching, is it giving an additional number or it is cannibalizing? That's what I mentioned, it is not cannibalizing at this stage. That's a good sign for us. The consumers, even in the rural side, they're also looking at the Metro, so that is also increasing. In the process, other models are also coming. Having said, we are amping up our digital presence in all the products.
Even for Classic, we did once again a Classic refresh in the market through the digital media and we started doing a lot of track days for our Himalayan and Scram. We are doing a college connect for all of our Scram. We actually started the flat track school, flat track, and weekend dirt track racing. All those areas it is actually helping at a product level also. The GT Cup, whenever the GT Cup thing comes up and there is a buzz in the social media, in fact, our even Continental GT's requirement and inquiry is going up. So Meteor, with a lot of news on the Super Meteor, a lot more guys also they started inquiring about Meteor. So the inquiry for Meteor also has gone up.
It's a combined effect as an organization when you come out with a new product in an adjacent series and convey that to the consumers authentically, "This is what we wanted to come and give it to you." Rest of the products are also growing at this stage. I have to give you one thing with the rider, this is a festive season. Everything has grown, so we have to wait and watch. I somehow have a feel that all our products, because we also have refresh plans, so the refreshes also will start kicking in. To that extent, we see there'll be a growth in every product which we have.
Okay. Secondly, on Hunter, any sense on what proportion of demand comes from, say, beyond top 10 cities or top 20 cities? Primarily, is it more broad-based in terms of demand, in terms of regional lenses, through regional lenses?
In terms of, we don't do it in that form. We normally look at it, the categories in terms of more than 125 cc motorcycle per month in that particular region, A A+ t ypes. If I have to tell you, the booking which is actually coming out city-wise and all those things is across until it's actually having a response. Having said, I might have to tell you, in the initial fill, which we wanted to give for the test rides and all those things, we have covered only about 70%. The remaining 30% in the studio stores and all we are yet filling up. We are slowly doing that. More and more opening, which we will be bringing in more consumers.
It's a pan-India, and it is not that any one particular area which is there. The growth which we are seeing in all the top 10 cities which we've been watching, everywhere there is a growth on that.
Got it. Sorry, one last question on CVs to Vinod ji. Sir, with respect to demand from small and single fleet owners, are we seeing them coming back? I mean, that has been one segment which was yet to show any material recovery. What are the trends you're seeing there?
If you look at the trends in the light and medium duty trucks or in the sub-5 ton trucks, I think the maximum growth is there in those segments. Those are the segments which have either single truck owners or very small fleets. Therefore, yes, of course, for the small operators, the interest rate and the sentiments, they matter more. But at the same time, I think there is demand for movement of goods that has to be met. I think it's coming because of the economic requirements.
Got it. Thanks. I'll fall back. Thank you.
Thanks. Next we have question from Kapil Singh. Please unmute.
Yeah. Thanks for the opportunity. Govind sir, first, the question is to you. When we look at your production, you know, we've in the past been facing supply shortages. When I look at the current volumes, are you able to, you know, supply as per market demand, or you are still facing, you know, shortages and therefore you need to build out production from where you are currently?
Well, as of now, I'm sure we also discussed it some other time. We are almost doing about 3,100-3,200 numbers. The production numbers, so capacity is not a constraint, number one. Because we have already built capacity, so that's not the constraint now. Second, we had an issue of the semiconductors, availability of steel itself, all those issues, that's not in the headwind as of now. It's by and large getting sorted out. I am not saying it is completely gone or something like that, but that's not the top of the mind issues now. All the semiconductors, all the electronic components, we also started off doing inventorying, substitutions, all those activities which are required, which has also kick-started. Production is not a constraint.
It's a model mix, exact model mix which we have to align and give it to the consumers, and that's what it is. It's not a concern anymore.
Okay, great to hear that. Vinod sir, one question to you, please.
Yeah, please go ahead.
BSVI phase II is coming up, you know, if you could help us understand what is the kind of cost increases we should expect for LCV portfolio, and what are the elements that are going to get added for that?
No, BSVI step 2 is going to come from April 1, 2023. Basically, there are much more stringent compliance requirements. What it means that the manufacturers are responsible for ensuring that the tail emissions they continue to meet the standards on the road for a long period of time after the vehicles are sold. Therefore, the regulators they can pick up any truck from the road and they can see that whether it is complying or not. I think that is the major change, that your emission standards have to perform absolutely in line with the law. If they don't perform, then there can be major implications for the manufacturers. Therefore, I think all the companies have to be very.
There are some additional requirements which are there. At the same time, as far as the costs are concerned, there will be some increase in costs. At the same time, we are also working on various other cost reduction avenues. Hopefully, let's see, how it lands. When we are closer to the date of, implementation, we will take a call that how much price increase is warranted because of that.
Sir, basically, I just wanted to understand. I know you will not have an exact estimate right now. Directionally, you know, when BSIV to BSVI happened, there was a big concern regarding this. There was an element of pre-buy also that was expected, you know. Is it going to be that large and will there be some segmental disruptions in, for example, LCVs could see much higher cost increases or something like that?
No, it will not be that large.
Okay. All right. Thanks. That's it from my side. Thank you so much.
Thanks. Next we have a question from Ankush Agarwal. Please unmute.
Yeah. Hi, sir. Thank you for taking my question. My first question is on the product portfolio. In the recent analyst meet, we have highlighted a lot of products, right? What I wanted to understand is the product portfolio expansion in terms of new category, right? For example, Hunter is a new category of product that brings a new set of customers to us, right? Scram is a different set of product that has brought a different set of customers to us. In terms of product portfolio that you are looking to launch, which are the products that will expand this category of customers and not just, you know, products that are expansion of existing line of products? If you can talk about that.
Ankush, product portfolio per se, if you look at, we were only one platform company. Now we have two platforms because UC was the only platform which we had. Now we have J- series and the P . We are also working on an upgradation cycle for all these platforms because we have just launched and we have done a transition on this. In the product portfolio, we always look at what is it. There are some products like Classic or Meteor, all those. They're all innovations, but it is a replacement of an existing product.
Yeah.
Adjacencies like we did in Himalayan for an adventure tourer. We found Scram is one more variant which we can bring in. Let's see what type of an experience the consumer is looking at. You know, globally in these sort of categorization, one have to understand it only is an experience. Now we had Meteor. With an experience we said, okay, in the platform of twin, we can come out with a accessible cruiser of a retro cruiser style from Royal Enfield. That's what we are doing. Similarly, we did a café racer in 650 cc. In a sports tourer category is there something else which we can do? At what point of time it is required, we will definitely come out with that. A roadster category, in that what is that the product adjacencies which is required.
Those are all the thought process for the product lineup, which we continue to evolve and we have signed up. That's why we always said that a healthy pipeline of new products on a platform base and category base have to be signed up, and then the organization have to start working on, and our CapEx are also dedicated only for that. To that extent, our pipeline is very healthy. We have a lot of products which we have been working on. Now in this year you would have seen we came out with the Scram, we came out with Classic, now we are with the P40 which we are coming up. Like that, all these products will start coming up at an interval which is, you know, the market is ready and we will time that and then we'll do the launching.
You will see a lot of new products which will keep coming from Royal Enfield.
Yeah, I get that. What I was asking is, will there be products that would be category expansion, right. Obviously we have now launched Meteor 650, which is an extension of existing Meteor product. Something like a Hunter, like which was a new segment altogether. Do we have those kind of products which could be a new segment that would bring new set of customers to us?
Yeah, yeah. That's why I said, you know, in some ways the roadster as a category, maybe which is very strong in a 350, there is a space for 650, right? We can look at it. What we always look at is we are a company, we don't do too much. That is also very clear, right? We do only a very limited things. We do a focused approach. Whatever product which we bring in, it has to be successful because we don't bring product and then start looking at what is an experience which we can give it to the consumer. We actually go ride along with the consumer. We ride, we spend time, get the whole thing and then say, well, consumer is looking at this sort of an experience.
Whether I can come out with a variant rather than giving a full new platform development. Full new platform development is a huge effort. What we are looking at is when we were doing this J and the P platform, we thought this platform should be expandable in a way that it can give adjacencies experience to the consumer and what are that. In the core product, then adjacencies, then variants, then color refreshes. You know, that's the cycle which we are normally look at for these two platforms. That way, if you look at Made in India and the international market, there's a huge potential for us to exploit these two platforms itself.
In terms of addressability, which we were talking about, is the outside India, the market potential is so much like what it is there in India, and we have just started exploiting into the international markets. Our focus also have to be how to access that market outside, with the platforms which are so successful now. It is all the platform and the product is just one year, two years. It is just hitting the maturity cycle and it takes time for the product also to get the maturity cycle, then it has a huge potential. We will not be doing anything.
Right. Got it. My second question was, like internally, like when we look to price a new product, so do we look at, you know, profit on per bike basis or it's more like a cost plus kind of approach that we look at?
Pricing is never on a cost plus, Ankush. We normally look at it, what is the product? Who is the consumer? What's the kind of accessible price point which he is looking at from Royal Enfield? And who is the source of growth? Where from the growth is coming? And what is his EMI? What is that we have to look at it. It has to be market focused rather than looking cost plus focused, yeah, Ankush.
Okay. Just to get a sense, what you're saying is, you're broadly looking at the profit pool that you can capture rather than, you know, per bike whatever you make, like that kind of thing.
We never approached it like that. We always, Ankush, we always looked at it. There is a consumer who wants an experience from Royal Enfield, so what's the value proposition which he is looking at from Royal Enfield. Today Royal Enfield success is that for the price which he's paying it for Royal Enfield, he feels it's a jewel which I'm just holding on, and the value proposition is very good. That's why we always look at it from the customer in the market. What's the value which we can deliver, which the consumer feels that, yes, Royal Enfield has delivered a fantastic value for me, for the kind of money which he has given, and that has to be very authentic. We always come from there. Rather than looking at the entire material cost plus add-ons and all those things that we don't do, Ankush.
Got it. Got it.
Internally, we do the benchmark. We have to do the case in point as any product which comes in, we always look at it, what's the relative price index? Where is the source of growth? What that price point for them? What does it mean in terms of EMI per month if in case they price it like this? Those calculations internally we do. We always look at the value for the consumer rather than just giving a pricing.
Right. That was very helpful. I have further question. I'll get back. Thank you.
Thanks, participants. That was the last question. Thanks to Mr. Govindarajan and Mr. Agarwal for replying to all the queries of the investors. For any unanswered question or any other query, please feel free to reach to investor relations team of Eicher Motors Limited. I'll like to hand over to Mr. Govindarajan for any closing comments if any.
No, thank you very much. It's been wonderful interacting with you people. As an organization, we always look at we are long-term focused. You know, internally we say that we are long-term aggressive. Any place, anything which we do, we always look at it as long term. That's why even in an investor meet, myself and Vinod, we all came and then explained to you that it is a growth-focused organization, and that's what we will be at it. When we are growing, whatever the correct things which are to be done for the organization, we'll continue to do that. In Royal Enfield, EV is another one space which we are now getting into that very intensely. In fact, I'm here, Siddhartha is here.
We are all spending time in understanding the whole ecosystem, what's happening, what sort of a technology which has to be looked at immediately. Those are the things. Maybe Vinod can add anything from the VECV side, for this closing.
No, I think, you have summarized it very well.
Thank you very much. Thanks to everyone for attending this. Thank you, Basudeb.
Thank you very much.
Thanks, sir. That's all from the investor conference call. We can close it now. Thanks.
Thank you.
Thank you.