Royal Enfield working on new EV platform, may venture out of segment

RE models are big boys’ toys, focused on longer journeys, making EV switch difficult (IMG | Eicher)

The wait for an electric motorcycle from Royal Enfield may be about to come to a close soon, but the company is considering venturing out of its traditional segment.

The iconic motorcycle maker is working on an all-new electric vehicle platform and could look beyond its traditional mid-sized segment when it launches its first electric model, said broker Nirmal Bang after interacting with company officials.

“RE is looking to launch EVs in FY25 on a completely new platform,” Nirmal Bang Institutional Research said. “A more-than-100-member team is working on developing electric two-wheelers and the launch is expected in FY25,” it added.

“RE may also explore segments other than the mid-size segment (250-750cc),” it added. Although Nirmal Bang did not clarify the point, it is unlikely that the company would enter the scooter market, as most of its rivals in India have.

RE set up a UK technology centre to develop electric motorcycles and an entire ecosystem of connected features. The brand commands a large, committed brand following in India. However, the company has been one of the few automakers in India to not launch a single EV model in the country yet.

Nirmal Bang listed the following challenges enumerated by Royal Enfield management in transitioning to EVs:

(1) Performance: 20-47HP output is delivered by the current internal combustion engines and replicating this performance will take the cost structure higher

(2) Range: Customers in this segment end up travelling 250-300KMs. It is a challenge to get this sort of a range in electric bikes on a single charge.

(3) Pricing: Higher battery pack size and higher grade electronics will result in significant price increases compared to internal combustion engine-based two-wheelers.

In addition, the management also pointed out that it has to keep an eye on profitability while transitioning to the EV business.

The key reason for the challenges is RE’s branding and positioning. It has a ‘macho’ image, and is primarily purchased by either those who want to identify with its tough, no-non sense image or those who value the bikes’ comfort on very long journeys. The second aspect has especially been an issue for RE in its EV plans.

The company’s current portfolio is focused on the 250-750cc segment which allows long distance comfortable rides. But when it comes to electric vehicles, factors like range anxiety become very important from a consumer perspective.

Providing a much higher range would significantly increase the cost of electric motorcycles, making them far more expensive than ICE bikes.

On the other hand, most EV two-wheeler makers in India including Ather Energy, Ola Electric and Bounce have primarily focused on electric scooters and low-speed electric two-wheelers where range anxiety is lower compared to performance motorcycle segments that Royal Enfield operates in.

Dilute Brand, or Dilute Affordability?

Industry experts say that achieving a range of over 150km in a performance electric motorcycle while keeping the costs affordable will be extremely challenging with current battery technology.

“Royal Enfield bikes are all about leisure and long rides. But in an EV, it will be very difficult to provide a range of over 200-300 km in a single charge at an affordable price point. So the company may look at different segments like electric scooters or lower engine capacity bikes where range anxiety is not so much,” said an industry executive on condition of anonymity.

RE faces two choices — stick to its core product positioning and come up with a (really expensive) bike that can actually go 250-300 km at one charge, or dilute its brand and come up with a scooter or something similar.

Royal Enfield is not the only motorcycle manufacturer to come up against this problem.

Bajaj Auto is working on an electric version of Chetak scooter while Hero MotoCorp has invested in Ather Energy and is also developing its own electric scooters. TVS Motor Company has iQube electric scooter on sale while its subsidiary Norton Motorcycles is developing an electric cafe racer motorcycle.

Hero MotoCorp Chairman Pawan Munjal recently said that a “range of over 100 km in an electric scooter is more than adequate for over 90% of customers while for electric motorcycles customers would want a longer range”.

Analysts say Royal Enfield will also have to set up a fast charging network on key highway routes to reduce range anxiety among customers used to long leisure rides. Partnerships with charge point operators could be one way to expand reach of charging stations.

The company retail network will also need heavy investments across sales, service and spares to upgrade for supporting electric vehicles. Training programs for sales staff and mechanics will have to be taken up on priority.

Royal Enfield currently sells models like Classic, Bullet, Meteor, Himalayan and 650 Twins in India. It is the market leader in mid-size motorcycles with more than 90% market share in the 250-750cc segment. While the overall two-wheeler market has struggled in recent years, Royal Enfield has managed to buck the trend and continue growing strongly.

Its total domestic sales were over 6 lakh units in FY22, making it the largest mid-size motorcycle company in the world. But this also puts additional pressure on the company to get its EV strategy right considering its dominant position in the ICE two-wheeler space.

Royal Enfield is also a late entrant in the global mid-size motorcycle market where rivals like Harley Davidson already offer electric bikes.

While the challenges are many, if Royal Enfield manages to overcome them and launch a compelling electric model catering to unmet consumer needs, it can certainly replicate the success of its ICE motorcycles. The EV transition is a tough nut to crack but Royal Enfield has a strong brand legacy and enthusiastic customer base which should help it in this journey.