Hi. Good afternoon, everybody, and good evening to the participants from other part of the world. Welcome to post result Q3 FY23 Eicher Motors conference call. We are pleased to get the opportunity to host the call, so we'd like to welcome the senior management of Eicher Motors, represented by Mr. Siddhartha Lal, MD and CEO of Eicher Motors. Mr. Vinod Aggarwal, MD and CEO of VE Commercial Vehicles Limited. Mr. B. Govindarajan, CEO of Royal Enfield Limited, and Mrs. Vidhya Srinivasan, Chief Financial Officer, Eicher Motors. Without wasting no more time, I'd like to hand over the call to the senior management. Thanks.
Hello, everyone, and very good afternoon, evening to all of you. Welcome to Eicher Motors Limited earning call for quarter three of FY22-23. I hope you're all doing well. As we finish three quarters of financial year, I'm very happy to report that we're fairing well across all business and financial parameters, both at Royal Enfield and at VEC, so all of EML. At Royal Enfield, we've seen two big launches over the last couple of quarters, with both motorcycles doing extremely well in the market. After a hiatus of two years, we're back with the largest celebration of motorcycling community that we have at Royal Enfield, which is Rider Mania. This year, or let's say late last year, in its new avatar called Motoverse.
We also had a very successful global media launch for the Super Meteor, it's our new flagship motorcycle in our range for journalists from all over the world in Jaisalmer, in Rajasthan this year. That's in January. We've got absolutely tremendous reviews from everyone on that. While our overall growth story in international market continues to gather a lot of momentum, we've also performed extremely well in India this quarter. We registered our highest ever market share of 8.1% in all motorcycles sold. Nearly one in three, that's nearly 33% of all motorcycles above 125cc. Where nearly one out of every three motorcycles above 125cc is a Royal Enfield now. We're really expanding the market of premium motorcycles as we speak.
In addition to all of that, we've also taken some large strides towards our long-term vision of sustainable mobility by making a strategic investment in Stark Future, with an initial equity investment of $50 million, translating to around 11% of their equity. We've also started a partnership and by completing a collaboration agreement with Stark Future, for research, development, parts, aggregates and sharing of technology and technical licensing and manufacturing. We really believe in the... We've scouted around for years in electric mobility space, and, we looked at scores of different manufacturers and startups, and we really like the team, the product, the philosophy at Stark, and we believe it's an excellent collaboration for us for years to come. We're really excited about that.
Both in supporting Stark for the tremendous potential that they have and back for Stark to support EML and RE in our very ambitious EV program. That's on EV for this time. At VE Commercial Vehicles, we have continued to strengthen our market presence around across all key segments, which is light and medium-duty trucks, heavy-duty trucks, and the full range of buses. We've showcased a glimpse of our capabilities through multiple future-ready products, which include a 13.5 meter electric Eicher bus. This was on call at Auto Expo last month. A hydrogen-powered truck. A combination CNG, LNG hybrid vehicle. Vinod will of course, Vinod Aggarwal will tell us more about the highlights of VECV and the Auto Expo in bit later. Coming over to our financial performance this quarter.
I'm delighted to announce that we've reported our highest ever revenue, our highest ever EBITDA and our highest ever profit after tax at EML. The consolidated financials of the third quarter is that This is of course, the revenue was INR 3,721 crores, which is up 29% from last year, for the quarter. EBITDA at INR 857 crores, up 47% from last year. A PAT of INR 741 crores, which is again the highest ever for EML and up 62% from last year. Overall at EML, we continue to maintain a razor-sharp focus on our future strategic growth plans along with a robust ESG vision.
Delighted to share that for a second year in a row, we are amongst the top 10 global automakers on the prestigious Dow Jones Sustainability Index, which is a very important measure for us. To conclude, I'm extremely confident that we are on a great and accelerated and sustainable growth path for Eicher Motors Limited. Thank you very much and over to Govindar ajan, CEO of Royal Enfield, to tell us more about the business at Royal Enfield. Over to you, Govindarajan.
Thank you, Siddharth. Hi everyone. Belated New Year wishes for every one of you. At Royal Enfield, with our strong and robust business fundamentals and a passionate team, that's what we are. I'm happy to say that we are continuing to make excellent progress towards our near and long-term goals. Continuing our vision of becoming truly global motorcycling brand, we have made definitely progress this year and specifically in this quarter. As Sid mentioned, we launched the Super Meteor 650. We had unveiled in EICMA. It was an excellent review. That was just an unveil. Subsequently, we showcased it in the Rider Mania, which is our Motoverse. The third, we actually launched it across the globe from the Rajasthan. It has been a brilliant response from everyone across the globe.
We're super happy to share even the Hunter 350, which we launched, won the Indian Motorcycle of the Year, IMOTY, 2023 this year. Since its launch in August, this motorcycle has been receiving unprecedented appreciation and love from consumers across the globe. First we launched it in India. Now it is also available across the globe. Rider Mania in 2022, as Siddharth mentioned, you know, we opened it as Motoverse to our rider community. We reimagined the Rider Mania, which brought in new spaces, new stories, new activities and experiences. This year in Rider Mania, we brought together almost about 14,000 riders. Their journeys, their stories, their machines, and much more in one inclusive space at Goa. It was tremendous enthusiasm from the community, which was represented by riders from 25 countries across the globe.
As far as our international footprint is concerned, just to give you an highlight, what's happening is a strong growth momentum which is continuing in our international markets. With markets like Americas region, Europe and the APAC, there's a significant growth which has been happening. In all these markets, towards our longer-term ambition, we also started looking at CKD facilities. This quarter we inaugurated a new CKD facility at Brazil, which is our third motorcycle assembly unit in Americas region and our fourth across the globe. The inauguration of the CKD in Manaus, which is in Brazil, is a testament to our commitment to the region and the significant potential that the Brazilian market holds for RE in time to come.
During this quarter, we also signed agreement to set up CKD units in Bangladesh and Nepal because all the other countries are also looking at CKD. Both these markets are also promising potential for Royal Enfield, and these facilities will be coming into action in course of time. Our Vallam Vadagal manufacturing plant, which is the second plant which we commissioned, has been awarded as a future-ready factory by Frost & Sullivan. It has been a proud moment for all of us who are involved in setting up this world-class manufacturing facility.
To share some of the highlights, our total sale, which is domestic and international put together, we did a sale of almost about 219,898 motorcycles in this quarter, which is up by about 31% on year-on-year basis, and 8.1% higher than the last quarter in this financial year. Domestic market, India sales was about 202,000 units, which is 34% year-on-year and 10% higher than the Q2, financial year 2023. The volumes are steadily increasing, and it is improving for us. As Siddharth was mentioning, our market share gain is at a very healthy pace, highlighting our strong brand positioning in all these market. International market.
Sales in international market is about 17,789 units in Q3, marking a growth of almost about 4.4% over last year. We continue to progress on our vision of becoming a global motorcycle brand from India, notwithstanding the macroeconomic headwinds in global markets. International retail performance for the 9 months, FY 2023, has been robust, and we have clocked a solid growth range from 37%-48% across various regions. Backed by our robust launch of new products which are there in the pipeline, we are committed towards sustaining the strong growth momentum in the international markets as well. We are looking forward for a very positive Q4 too. I'll hand it over to Mr. Vinod Aggarwal to walk us through about the VECV financials.
Thank you, Govind. Good afternoon. I will begin with financials for VECV. Our total sales in Q3 have been 18,162 units, up 13.2% from 16,044 units in Q3 of last year.
Our revenue from operations are INR 4,603.9 crores, up 27% from INR 3,625.7 crores in Q3 of last year. Our EBITDA has been INR 304.95 crores, up 26.2% from INR 241.55 crores in Q3 of FY22. Our EBITDA margin is 6.8%, and this is same as was there in last year Q3. Our profit after tax has been INR 160.3 crores, up from INR 67.7 crores in Q3 of last year.
We registered robust volumes across the board with highest Q3 sales at 18,162 units. We registered highest ever Eicher and Volvo heavy duty truck sales in the quarter of 5,241 units. Our market share in heavy duty trucks now is more than 8% for both Eicher and Volvo trucks. Our continuing focus on improving dealer satisfaction and uptime for our customers is showing in high levels of service and parts sales as our customers leverage our expanded dealer network. We had highest ever quarterly parts business of INR 295 crores, registering more than 20% growth over Q3 of FY 22.
At the recently conducted Auto Expo 2022, we have showcased a glimpse of our capabilities through multiple future ready product lineups aligned with the Government of India vision for efficient logistics and decarbonized auto industry. We unveiled, as Siddharth mentioned in his address, we unveiled India's longest Eicher 13.5 meter electric intercity coach. We unveiled Eicher 2049, 4.9 ton GVW electric distribution truck for near city and intracity distribution. We unveiled LNG driveline for long-haul trucking, both in Volvo and in Eicher brands. We displayed hydrogen ICE and hydrogen fuel cell technologies. With that, I hand over back to you for the question and answers.
We can start off with Q&A, now, Masu and Dipya.
Thank you. First question we'll take from the line of Prithyani Gunjan. Prithyani, please go ahead.
Hi, can you hear me?
Yes.
Yeah, loud and clear.
Yeah, okay. Thanks, thanks for taking my question. I had two questions. Firstly, on the margin side, I just wanted to get some sense from you all as to, you know, where are we on the metal correction. Has large part of that reflected in the in this quarter? In terms of incremental, you know, how should we be looking at the margins? Because, you know, there was a mix impact which was quite significant for the last two quarters. Maybe, you know, some color on, you know, incrementally, how should we be thinking about the levers both on the positive and the negative side on the margins?
Gunjan, I think. Let me give you on the GC level, which you are talking about. First and foremost, every one of you, I'm sure now you all would have seen it, the commodity pressure is not there, so it has to start flowing in. Coming quarters it will start flowing in. It started showing in this quarter. In the coming quarters also it will start flowing in. You know, there is one more, which I just wanted to bring in, maybe Vijaya can add on. At Royal Enfield, when we do a price correction or something like that, for us, more than the price correction, the consumers have to get protected.
What we have done is, for all those consumers who have actually booked our motorcycles, even though at a particular point of time we increase the pricing, we said we will give the price protection for all of them till we offer the motorcycle once to them. If they take a decision to actually not taking the motorcycles and I'll take it later, that's fine. Till we actually give the opportunity for them to say, "Yes, I'm taking the motorcycle," we will do the price protection. That will also flow in. In the last quarter call also I was just mentioning, we have done a platform change, which is the J-platform. It has just been there in the market for the past two years, starting from the Meteor 350. Now the value engineering, all those activities will start kicking in.
There are a lot of activities which are happening around the GC. Hope that gives that, the overall sense of what are we doing on that area.
Yeah.
Okay.
If I can add to that. I think, Gunjan, if I can add to that. I think on an absolute level, first off, our gross profit has increased to about INR 1,555 crores, which is an increase of 4% quarter-on-quarter, 34% year-on-year. On a YTD basis, our gross profit per bike has increased by about 4% versus, you know, the same quarter the previous year. Also on a YTD basis also it's increased by about 4%. Those are the good things which are happening on a gross profit standpoint. As you rightly mentioned, there has obviously been impact of product mix as well as the international mix just flowing into our GC.
Adding to what Govindarajan has already mentioned, we have taken price corrections of about 1.5% on Hunter as well as Bullet in the last quarter. As you mentioned, we have been protecting the customers from order book standpoint as far as the margin is concerned, but I think we are expecting to see that benefit flow through into the GC. Yeah.
Okay. Just to get this right, when you mean price correction, you mean that you all have taken price increases and you're still giving the prior order book at the, you know, at the locked-in prices. Is that understanding correct?
That's right, Gunjan. To an extent, as I clarified. Because consumers have come back and then say, "We love your motorcycle, and we are booking and willing to wait." in between, because of whatever the business reasons were, we increased the price. As an organization, for us consumer comes first. We always said, till we offer the motorcycle to them, we will do a price protection for them.
Okay.
It does mean the price increase, which is to flow into our PNL, will happen later point of time. That's important for us because the consumers have to be respected in that form, because they believe that there is a possibility that this motorcycle will be available to me at a particular point of time.
Okay. The steel benefit is also yet to flow through, and this price benefit is also yet to flow through. That are the incremental positives that we should keep in mind.
Partially it could have flowed in earlier year.
Partially flowed.
You can't say that it will flow through 100% now. Right? Partially it could have flowed through-
Yeah, Gunjan, what happens is, all these commodities corrections which you do at a particular cycle, we take a quarterly cycle, but the cycle can go in between the quarter also. Sometimes what happens is when the inventory is there at a particular price point, then that gets consumed. The commodity advantage which is there, it will start flowing in the quarters. Partly we have taken, the money will flow in.
Okay, got it. The second question I had was on the model launch pipeline. I know you don't talk each, you know, what model, what timelines, but, you know, maybe some color on how should we be looking at FY 2024 in terms of new model introductions or refreshes to the existing portfolio. Even a broader commentary on, you know, the number of interventions that we could see will help us think through, you know, the volume growth for next year.
You know, in 2023, we launched Hunter, and I'm sure, everybody will be doing a market share. It has been doing outstandingly well for us, which we wanted. We had new set of consumers have to come into the Royal Enfield fold. That's what it is exactly doing to us. On the learning which we had on the cruising through our Meteor, which we used it for J-platform launch, we actually launched even the Super Meteor. We launched the Scram on the Himalayan platform. As we always mention, we keep looking for what are the adjacencies which are there, which the consumer wants and experience across the globe. We being a rider, we also constantly keep looking at what's the kind of an experience which the consumer wants, and we keep doing it.
There's no new product which can come in one year, right? All these things have to be thought through for at least three years, four years window. We have a very healthy new product lineup, which are there, which we will come in the next few years, one after the other.
Okay. I'll join back with you. Thank you.
Thank you. An announcement for the participant. We would request you to restrict your questions to two as we have a long queue of questions. Also, if you could announce your organization name before asking your question. Our next question is from the line of Kumar Rakesh. Rakesh, please go ahead.
Hi. Thank you for taking my question. Good evening, everyone. My first question was around, Bullet 350 cc that has to go on J-platform. I'm guessing it could be anytime soon we will be launching that. Will this transfer increase the cost and price for the product?
I'm sorry, Rakesh, we're not going to comment on future products. That's a potential future product you're talking about, so we can't comment on that.
Fair enough. I have a question on VECV margin as well. VECV margin expanded by about 100 basis points quarter-on-quarter, while commercial vehicle peers we have noticed expanded much stronger margin on a quarter-on-quarter basis, more than 200-300 basis points. Where did we lag in margin expansion while we are hearing that discounting pressure has reduced at least in the last quarter? Do we expect more margin expansion to happen in the coming quarters?
I think, you have to look at the consistency in our margins. If you look at the margins of other companies, there have been, you know, significant ups and downs. This quarter they have shown good margin, and whereas the earlier quarters, they had been showing very low margins. Whereas now we have, we have been very consistent. As you mentioned, there may some positive impact flowing partially due to the commodity pricing. Therefore, we cannot make the forward statement that how much it will go up. However, we are on the right track.
Got it. Thanks, Vinod, for that. I just had a clarification to Gunjan's question. You talked about the price protection to customers. In our current order book for the models, do we still have some orders left with price protection or is that largely over in March quarter?
At a particular point of time when we took a price increase, if there is an order book which was there, for those consumers first time will be offered, obviously we will do the price protection. That's a philosophy we will continue, Kumar.
Thanks, Vinod. I'll fall back in the queue. Thank you.
Thank you. Next question is from the line of Pramod Kumar. Pramod, please go ahead.
Yeah, thanks a lot for the opportunity. My first question is on the export outlook. Given the macro headwinds, what we are facing, if you can just help us understand, how do you look at the export potential or, in the near to medium term? Given the fact that we are also establishing CKD plans now, will that help us further in terms of pricing in the end markets? How should one look at export outlook for, say, FY 2024? Because we've had a spectacular run for the last three years.
Now even with Hunter export starting in the last quarter, how should one expect export growth outlook for FY24, Govind, in terms of, should we be looking for the 10,000-15,000 kind of a monthly run rate going forward?
Look, I think, Pramod, thanks for the question. You know, it has been always said outside India, the potential is very high for us.
Yeah.
We always look at it as a long-term growth which we have to bring in. As an organization, we are also a very long-term-focused company. We don't look at any short-term. In the international market, at a point of time when the platform have to be increased. From the twin platform which we first got in, then subsequently we added the J-platform. All the products around that, today they're all Euro 5 compliant. Globally you can actually sell those motorcycles. What we have done is we started looking at community building and retail outlet expansion activities in all the countries, and also started looking at CKD in all those markets, which is where the market is very good.
All those areas, what we have done is all the background activities which has to be done in the market growth is what we have been focusing on. This year it has been showing that the market is growing. We also touched on the macroeconomics. I mean, nobody can escape from any of that sort of an impact. As of now, the policy which we are looking at is on how is the schedule of auto component industry from the Europe manufacturers and how is it going. That's not showing anything very adverse. That's a positive sign. Mobility area, it is continuing. I mean, we are hopeful that we will not have any major impact because of the macroeconomic indicators. Basically.
Thanks, Govind.
Yeah.
Yeah. Yeah, thanks, Govind. Second question is on the domestic demand side. Given the kind of steep price inflation, what we've seen because of regulations and various other factors. Your Hunter launch has been as a kind of really been a big hit with the customers because you in a way have kind of dialed back the price increases effectively without compromising the the product and the entire Royal Enfield appeal. Given the success of Hunter, is there a thinking that potentially you can do more on those lines in terms of probably more fresher designs which can kind of attract more younger customers and widen the addressable market for Royal Enfield?
Hunter is been the one of the biggest hits in the entire two-wheeler industry in the last few years. Is this something which you are looking that we can probably do more on that kind of a slightly more affordable or more or lower priced product as a strategy and more designs in along with that?
What we know as a team, which we have been also discussing with the team, is we have to do lot more even in Hunter also, Pramod.
Yeah.
You know, we launched it in August 2022, so it's a partial year, and this year it is going to be available in full year. We also had the mix changes which were there between the Retro and the Metro.
Mm-hmm.
Which also has been. Now the focus is brought back in the company. All the rural market, hopefully they, the spend also starts off in that particular area. There is a huge potential of all the youths in that particular area also. It is actually doing what we were intending to have it in the company of getting new set of consumers, younger audience, who love the brand Royal Enfield, but he wanted a motorcycle bit more agile and easy for him to maneuver, and that's exactly it answered. There's a huge potential for Hunter itself in domestic and also in international market. We are yet to exploit that itself.
So.
That will be the focus with us now.
Govind, do you expect Hunter share to kind of volumes to keep getting better and better? If I understood what you said. As in, do you seeing more upside to the Hunter volumes in domestic market?
We feel that all our products are in a better position to actually grow. When the market opens up more and more, It will grow. Even as an organization, we are also fairly new. All those products along with the market has to grow now. The best thing is Hunter, which is getting new consumers. It's not cannibalizing Classic. That's a good sign for us. In all the markets wherever we have seen counter-wise that whether it is getting new consumers, and it is getting. When the market opens up, you all know in the domestic market, the market is not so good for everyone.
Yeah.
When the market opens up, it's going to be really good for us because that's how we have been gaining the market share. A lead indicator for anyone to understand that the brand is being loved, the products are very good. There is an acceptance in a market which is not so buoyant.
Yeah.
Still when the market share is being gained, when the market is actually coming back, we hope to see that our, all our products also will be doing well, Pramath.
Thanks a lot, Govind, and wish you guys all the best. Thank you.
Thank you. Next question is from the line of Hitesh Goel. Hitesh, please go ahead.
Thanks for taking my question. My question is first on the, if I look at, you know, the consolidated EBITDA minus the standalone EBITDA, right? There's not much contribution in this quarter, right? Can you talk us through what has happened here? Because it was showing some INR 17, 18 crores kind of EBITDA contribution coming from the subsidiaries. Can you please talk about that first, then I'll take my second question.
I think to some extent, you know, obviously there has been EBITDA which is happening in various subsidiaries. A little bit from a timing standpoint because we are building up inventory for season and because of that, there is a little bit of reversal of EBITDA which we are booking locally. I think we've talked about it in prior quarters. I think that is what is showing up in the difference between standalone and consolidated.
There are no launch expenses or something in the abroad subsidiaries because of, you know, Hunter exports starting?
No, no. Basically when we send inventory from India to global subsidiaries, we are building up for the season because we are moving with the season in some, in Europe as well as North America. Some of that reversal is taking place, which is essentially impacting it, Vinod.
Okay. On the, my second question is on the standalone business. Basically, is my understanding right that on a Q1Q basis there has been a 5%, 6% shift towards Hunter? Like you had spoken earlier quarters, there's an 8% lower gross margin on Hunter. When I compute this, there's a 50 basis point impact on, you know, gross margin from Hunter. There's 70 basis point coming through raw materials in this quarter. Is that the right way to look at it?
I mean, five was coming up.
I think approximately the way you should look at it is that we have a 0.5% up, upstream in terms of, you know, commodity price improvements in the... which is reflecting in our gross margin.
Okay. Okay. Going forward you're saying there'll be more commodity benefits yet to flow through because of the lag effect, right? In the fourth quarter.
Well, I can't give you too much.
As been discussed , partly it flowed, partially it has flowed. Yes, it will because commodities as of now it is not showing. There are enough researches which is also coming back and then saying if China picks up how the commodity will behave and all those things. Yes, when the commodity is easing out, it actually flows into the PNL.
Great. Thank you. Thank you, all the est. Yeah.
Thank you. We have next question from the line of Raghunandhan. Raghun andhan, please go ahead.
Yes.
Raghunadhan .
You're on mute.
Hello. Yeah. Am I audible now? Yeah.
Yeah.
My first question. Considering the positive reviews for Super Meteor, how do you see the potential for the product in domestic and export markets? Providing critical upgrades for existing 350 cc vehicle owners has been a objective for the company. How do you look at strengthening portfolio in larger cc products and looking at upgrading customers?
Raghu, we have lost you in between.
I'll just repeat my query. Super Meteor has received strong positive reviews. How do you see the potential in domestic and export markets? How do you see the trend of upgrading existing 350 cc vehicle owners towards higher ccs? How do you look at strengthening the portfolio in the larger cc products ahead?
Okay .Sure . Raghu, maybe I'll rephrase the question. If you're asking how is the Super Meteor 650 will help in the upgrade cycle for Royal Enfield. If that's the question. Am I right?
Yes, sir. Yes.
Okay. Let me just articulate, if I can add in this. You know, our Super Meteor 650 is on the platform of 650, twin engine. We came out with a café racer, and then, we also came out with an Interceptor, which is a roadster. Now we wanted to come out with one more motorcycle, which is actually a cruiser. That's what a Super Meteor 650 which we launched. When we launched in our Motoverse without even announcing the price and all those things, there is a good response of actually people coming and booking. We got a good number of booking then, on that day itself. Now it is also being exported to other markets. It's just opening a segment for Royal Enfield, which is already existing.
Cruiser is existing everywhere, but everyone is looking at an easy cruiser, thoroughbred, and it is from Royal Enfield, which is easy for them also to maintain. It is not too heavy. I mean, people won't get intimidated, but it should have a solid presence, and that's what is our Super Meteor 650. All the journalists who came, rode along with us at Rajasthan, everybody came back and then said, "Royal Enfield has got a good cruiser for the global audience." It's in initial stages. The response from the journalists and from the consumers have been very good. We are very happy about it. It opens up for our consumers, as I mentioned.
It can be a Continental GT which they can take on or Interceptor they can take on or Super Meteor they can use, depending upon what sort of an experience he wants from the particular product. Now we are giving more offering on the 650 platform for our 350 existing consumers who want to do an upgrade. Anything more? No, that's it. Yeah.
Got it, sir. Thank you. My second question, to Vinod, Sir. Sir, with the RDE norms coming up, by when do you expect the model changeovers to happen? Broadly, what is the range of cost increases?
Sorry.
Model changeover and cost increases and
Raghu, this is for OBD2 norms, are you asking?
Yes, sir.
For VECV. Okay. Over to you.
Yeah. Model changeover is going to happen in quarter four in a phased manner, by first quarter we will move 100% to OBD2. Of course, the, as far as the cost increase is concerned, for that, it is not going to be like the earlier BS4 to BS6. It will be much, much lower than that. It should be within, I think, 3% or 3%-5% maximum.
Sorry sir, I missed it. It will be below 5%?
Yes. Below. Around 3% or between 3%-5%.
Thank you, sir. That's very helpful. Thank you so much.
Thank you. Our next question is from the line of Chirag Shah. Chirag, please go ahead.
Yeah, thanks for the opportunity. Our first question is for Vinod, sir.
Mm-hmm.
With transition.
Vinod.
Sir, are you looking to build up some inventory in anticipation of a pre-sales kind of a thing? Or you are looking to transition from here on and willing to sacrifice some volumes, not take the risk of creating an inventory in the system?
Of course, I don't think we are going to create any inventory for having this benefit, so there is no such plan. I don't think we will suffer because of lack of production, because we are already a lot of our models will move to OBD2 even in quarter four itself. There's no concern on production or inventory build-up of OBD2.
Okay.
We don't see any concern.
Okay. No, I recently understood. Are you looking at?
Are we looking at?
Yeah.
No, we are not going to build any inventory for earlier models.
Okay. Sir, second question is Royal Enfield on Hunter. If I have to understand, after five, six months of Hunter performance, what is the assessment in general in terms of potential ramp-up of Hunter? Is the production capacity geared up? Given the commentary by Govind that rural markets are still unexplored or not completely explored, can we expect a significant ramp-up in Hunter volumes from current, monthly run rate and is production geared up for that?
Yeah, Chirag. I think production-wise, initially, as I mentioned between the Retro and the Metro, we had focused activities which has been done. Now it's all sorted, so ramp-up is not a problem. Second is, as far as the market is concerned, as I mentioned, Because of the ramp-up which has come in and all those things, so now we will start looking at, actually exploring more and more markets with Hunter.
We can assume that if there is a demand, you can increase the supply of Hunter by 25%, 30% from current run rate. Is that a fair way of looking in terms of your capacity planning?
Yeah. Yeah. Yes, Chirag.
Yeah. Yeah. Thanks a lot for this. All the best.
Thank you.
Thank you. Our next question is from the line of Ambar Shukla. Please go ahead.
Yeah. Hi, thanks for the opportunity. I just have one question on supply chain. Is there any supply chain issues still persisting or we will see production recovery from here on?
Supply chain is not the top of the mind issue at this stage. Having said, you know, if I had to tell you that, is it all completely sorted for everyone? Still some niggling issues then and there, but that's not a top of the mind issue that everyone have to be alert at every point of time. It's, it's pulling its weight now. Hello?
Sure. Sure, sir. Thanks.
Ambar, you have any more questions? I think that's-
Yeah, thanks. That's it from my end. Thank you.
Thank you. The next question is from the line of Nishit Jalan. Nishit, please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. I have two questions. Firstly, in the last phone call, you had talked about that, since Hunter model was just launched, the sale of accessories with Hunter model was on the lower side. Just wanted to understand how are things picking up on that front. Secondly, on the production side, correct me if I'm wrong, we have a capacity of about 1 million units on an annual basis. Any plans to ramp up the capacity? That's it from my side.
Nishit, first is about the motorcycle accessories which you asked for the Hunter. In our genuine motorcycle accessories business has been steadily growing. We have almost about 587 plus SKUs, which we have added up, in terms of styling, safety, comfort, in various experiences which we can add on to the motorcycle. Initially when we launched Hunter, at that point of time, the JMA testing and all those things are going on. Now those are all sorted out. Now the consumer can actually go through the configurator which is there, through which he can book and visualize the Hunter along with the motorcycle accessories on book. Second, you asked about the overall capacity. Yes, we just had a quarter one itself we have mentioned.
Our install capacity is protected for the near future requirement. Having said, any increment which is required, it is not that we have to do it from a scratch. It will be an incremental investment of debottlenecking some of the areas, and that's also not a very long-term kind of an activity wherein you have to wait for it to get the capacity coming in. It's all sorted. Some areas where you have to do, balancing activities, which is a short-term activity is possible for us to do.
Got it. Just to follow up. These accessories on Hunter, fair to assume that in the quarter gone by, whatever way you track your accessories, that's a percentage of vehicle price. On that metric, was Hunter at par with other models or do you think it is still ramping up and we will see that happening in the coming quarters and was not the case in Q2?
No, we normally look at, you know, more than a motorcycle and all those things, which is an internal metric. What we look at is our offerings to generate motorcycle accessories. How many consumers who are buying the motorcycle are actually looking at our motorcycle accessories also when they are buying the motorcycle at the dealership or at our retail outlet. Adoption is good. Everybody started looking at the quality of our motorcycle accessories at a different level. At the time of purchase, people started buying our motorcycle accessories and the number of SKUs also have gone up. There's a choice for the consumers to look at, as I mentioned, on different experiences which you can take it through our motorcycle accessories. As I mentioned, there is comfort, different seat configurations which are there.
Style on different color configurations which can be actually taken up through that. On the safety, on the engine guard, we have different varieties which are there. In terms of other touch wheel components, all those areas, so the SKUs are going up. To that extent, the penetration of the accessories by all the consumers, when they're buying the motorcycle is going up. Also, for the older motorcycles, when they come for service, there also now we started actually selling the motorcycle accessories and the traction is good there too.
Okay. Thank you. That's it from my side.
Thank you. Our next question is from the line of Aditya Jhawar. Aditya, please go ahead.
Yeah. Hi. Thanks for the opportunity. Sir, if you can just, you know, clarify on the previous participant's question that Hunter is about 800 basis point lower gross margin versus others.
I don't think we actually made any such statement.
Yeah. That is, that is not the case you are saying, right?
No, we've not made such statement.
Not made.
We're saying whether that's the case or not yet.
Um.
Very good.
Yeah. My second question is, do we have a target in mind, in terms of, you know, what could be our, you know, volume contribution from Hunter on an overall basis? In the initial year, possibly it is slightly on a higher side, or should we expect a contribution in the similar range in the next couple of years?
Aditya, we don't actually look at the numbers. For us, numbers is always a derivative. We always look at what sort of an experience we give to the consumer, whether what we envisaged, the kind of an experience which we have to give it to him, whether we have given. What we look at is we go back to the community and then say, "This is what is the motorcycle which we have made. This is the kind of an experience which we can offer." The community actually takes on, and that's how our numbers come. We don't put a number to within ourself also and then say, "Oh, go and gun for that number." That's not the way we work as a business.
Perfect. Perfect. Okay. Thanks a lot. That's it from my side.
Thank you. Our next question is from the line of Kapil Singh. Kapil, please go ahead.
Hi. Thanks for the opportunity. Sorry I joined in a bit late. In case it's a repeat question, I can take it offline. Just wanted to understand your views on pricing. Where are we? Are you comfortable at current level of pricing or you think that we need to raise the pricing and recoup margin over the next 2-3 years?
You're asking comfort on the pricing?
Basically at current level of pricing and gross margins, is it something that you are comfortable at or you think you need to raise it and improve gross margins over next 2-3 years from current levels?
I think, Kapil, pricing is not always the businesses have to be looking at internally, right? Pricing have to be looked at from what value proposition we give it to the consumer as a product, and what's the overall thought of the particular product from all the 6 Ps which we do there. Time to time we always look at what is the market, what's happening in that, what's on affordability and accessibility which the consumers are looking at, and what's our product offering them and where should we price. We always look at it strategically from the consumer in rather than from cost plus type.
Okay. Is there a, like, is there a target margin range you want to operate in or this will remain dynamic depending on operating conditions?
Again, we don't give forward-looking targets and all that. We can't help you with that, sir.
Okay. Is there a target margin range that you look at? I don't want the numbers, but I just want to understand how you think about it. Is it?
No, we don't. No, Kapil, to be honest, maybe you joined late also. As we mentioned, we don't give any target contribution level, target numbers. That's not the way we work. We always look at what's an experience which we have to give. Let's be focused on that. That's what we do.
Okay. Thank you.
Thank you. Our next question is from the line of Sridhar Kalani. Sridhar, please go ahead.
Hello. Hello.
Yeah, Sridhar.
Yeah. My question is regarding other income. If some light could be thrown upon the same, because since I can see it's, you know, like, 100% year-over-year growth can be seen and a 25% increase from quarter-over-quarter. If the management would share some details on the same.
I think we've had. As far as other income is concerned, we've had some additional expand income from these. You're talking about other comprehensive income, right?
No. Other income. Other income.
Yeah.
From the non-motorcycle segment, I can see some other income being shown up.
Yeah. I think we just had more interest income which is coming in, but we will give you the details of that separately.
Is it just the interest income or there has been some Forex gain also?
I'm sorry? I can't hear you properly.
I'm saying is there just, interest income or Forex gain also?
No, no. It's largely interest income. Yeah.
Okay.
Yeah.
Okay. Also if you could give us a sense about in the international market, how's the ground-level demand? As per other OEMs, there seems quite some weakness for the next three to six months. Since Royal Enfield caters to the premium segment, some views on the ground level from international market from your end.
Look, Sridhar, I think as I mentioned, you know, there is a macroeconomic indicators are showing there is a market conditions. Nobody can escape out of it. At the current level, what exactly is happening for the Royal Enfield, that demand is good, the interest of our motorcycles are good. Super Meteor 650 which we have launched, they're just getting delivered into the international markets. That's one such motorcycle which the international consumers have been looking for from the Royal Enfield stable. To that extent, and we are stocked well for the coming season. We are prepared to address to the market. If the macro is actually turning out to be negative for everybody, nobody can escape. Everybody have to look at strategically what is it we can do at that point of time.
We have to wait and see for some more time how it is turning out to be in the future.
Okay. I can say that we are a bit cautious and optimistic on the whole, demand side, right?
From Royal Enfield angle, yes.
Okay. Thank you so much.
Thank you. Our next question is from the line of Hirenkumar Desai. Hiren, please go ahead.
Can you hear?
Yes.
Yeah. One question is again regarding the exports. Over a medium term, let's say 2-3 years, are we targeting any proportion of revenue coming from exports?
We look at international market as a huge potential. As I mentioned, we are a focused company. We look at how do we build a community outside international market. That is what is the focus. That's very promising to us. Business comes.
What we're tracking is market shares. We look at our relevance in each of these international markets. That's of supreme importance to us. The actual proportion of international to full business is a resultant, right? I mean, it is going up. It will continue to go up. We don't care about it as much because we can also grow India market. The idea is not to. Well, I mean, in most likelihood, international will outpace in the long term. Of course, in some years India may outpace, in some years international. Really, I think the most important thing we look at and we track, and we're actually doing extremely well in this, in market shares in midsize market. In U.K., I believe we're already number one in midsize. Is that right?
That's right.
We've crossed all the Japanese players and we're number one in midsize. In Europe, we have double-digit overall market shares in midsize. In other markets, in US, Brazil and all, we're in high single-digit market shares. That's what we're tracking very closely right now to start improving our market shares in mid-weight motorcycle segment.
Yeah. Second question is related to the supply part of our motorcycles. Right now, do we have enough capacity to serve local as well as export markets or we are having to sort of ration either local or or export markets?
No. Supply chain is not at about the mind issue, right now. Backend can actually supply the demand, depending upon the model mix, depending upon the country requirement. All those things is possible.
Just one last small thing. Do we have a waiting period at the moment?
We have a healthy waiting period for products.
Okay.
It depends upon the product it varies.
Okay. Okay. Thank you. Yeah, that answers my question.
Thank you. We have our question from the line of Vipul Aggarwal. Vipul, please go ahead.
Hi. Am I audible? Yeah.
Yes.
Am I audible?
Yeah.
Thank you for taking my question. It's again on export side. Now, since we have strong product line and decent penetration in export market in terms of presence, can you give some flavor on how the marketing strategy working out in export market, maybe region-wise or country-wise, if possible? Like, where are we in creating the segment for Royal Enfield in developing countries like you did in India and, how is it the segment expanding in the developed markets?
First and foremost is our focus is in the middleweight outside India also. Our North America, Europe, and Japan region, those are the focus markets, which we know LATAM is also added into this. That's why we are going in for the CKD operations also. As far as the marketing you have asked, one is, you know, the community has to get involved. What our focus is on the community build and on the brand building activities which we have to do. What we have done in like to actually go and spray and pray type, we don't do that. It'll be a targeted marketing, building the community, reaching out to the consumers in the way they want it. Our customs, which is picking up very well. Rides are picking up, which we will do.
Okay. Actually, I was more towards like, for example, in Indonesia, how are we approaching the market and how far we have reached over there? Just trying to get some sense like, now Hunter is a very good fit for these markets.
We believe. I'm sure you would have studied it. It has restrictions on the local content. There is a quota which are there, so we are trying to work around all those things. It's a good market, but it has its own nuances which we have to work around. Depending upon the priority in the business, we will keep working on it.
Thank you. Thank you, sir. That's all.
Thank you. That was the last question for this session. I would now like to hand over the call to the management for closing remarks. Over to you, sir.
I'd like to thank you all. Thank you. I think we've had a great quarter at Eicher Motors Limited and lots of interesting developments and looking forward to the coming quarter, the coming year. Thank you very much for attending.
Thank you very much.
Yeah. Thank you very much.
Thank you.
Thank you. Bye-bye.
Thanks, guys.
That's all.
That will be all for today. Thank you so much everyone for joining us.