Royal Enfield is preparing for a sizeable expansion of its manufacturing operations, with the company targeting annual production capacity of 2.45 million motorcycles by FY30. The motorcycle maker is also studying the possibility of establishing a CKD assembly operation in Indonesia as part of its international growth plans.
The plans were detailed by Royal Enfield CEO and Eicher Motors MD B Govindarajan during the company’s Q1 FY27 investor call. Royal Enfield currently has manufacturing capacity of around 1.5 million motorcycles annually across its facilities in Chennai and Cheyyar, Tamil Nadu.
Capacity utilisation has increased considerably over the past few years, rising from around 50 percent in FY20 to approximately 90 percent in FY26. The first module of an ongoing brownfield expansion at Cheyyar has now become operational, with daily motorcycle production crossing the 5000-unit mark.
Further phases of the Cheyyar expansion are scheduled to be completed by FY28. Once operational, Royal Enfield expects its overall annual manufacturing capacity to increase to around 2 million motorcycles.
The next phase of expansion will come through a new greenfield manufacturing facility in Andhra Pradesh. Eicher Motors’ board has approved an investment of Rs. 1225 crores for the first phase of the project, which is expected to add approximately 4.5 lakh motorcycles to Royal Enfield’s annual production capacity.
Combined with the expansion in Tamil Nadu, the Andhra Pradesh facility is expected to take the company’s total capacity to approximately 2.45 million units annually by FY30. This represents an increase of more than 60 percent compared to Royal Enfield’s current manufacturing capability.
Alongside expanding domestic production, Royal Enfield is looking at additional assembly operations overseas. Indonesia is currently under evaluation for a new completely knocked down (CKD) facility, with the company expected to make a decision during the current quarter.
Royal Enfield currently supplies Indonesia through its CKD operation in Thailand. However, shipments remain subject to an import quota of around 10,000 motorcycles annually despite the ASEAN trade framework. Setting up local assembly in Indonesia could allow the company to work around this volume restriction.
Royal Enfield has already identified a potential local assembly partner in Indonesia. According to the company, relatively low local content requirements could also make it possible to establish the facility within a shorter timeframe.
Local assembly, however, would not eliminate all cost-related challenges in the Indonesian market. The company has indicated that a luxury tax of around 140 percent would continue to apply even to locally assembled motorcycles. The primary advantage of establishing a CKD operation would therefore be the removal of import quota restrictions rather than a substantial reduction in taxation.
Royal Enfield currently operates seven CKD assembly facilities internationally, located in Argentina, Bangladesh, Colombia, Nepal and Thailand, along with two units in Brazil. Together, these facilities have an annual assembly capacity of approximately 1.5 lakh motorcycles. An Indonesian facility would become the company’s eighth overseas CKD operation.
Mexico is another market under consideration for local assembly following an increase in import tariffs. The company has been gradually increasing its international manufacturing presence as it looks to reduce its dependence on completely built-up exports and respond more closely to individual market requirements.
Royal Enfield’s overseas business has also been growing. International revenue crossed Rs. 1000 crores for the first time during Q1 FY27 and accounted for around 15 percent of the company’s overall revenue. Brazil and other Latin American markets were among the major contributors to the growth.
The planned capacity expansion indicates Royal Enfield is preparing for higher volumes in both India and overseas markets over the remainder of the decade. However, utilisation of the additional capacity will ultimately depend on sustained demand across its core middleweight motorcycle segments and the company’s ability to expand its presence internationally.
