Royal Enfield Supply Chain Disruptions Continue To Hurt Production
The firm is unable to meet demand and is currently sitting on a huge backlog.
Royal Enfield supply chain disruptions due to the pandemic and government mandated lockdowns continue to hurt the firm as it currently sits on a backlog of over 40,000 bookings.
Unable to deliver its motorcycles to buyers who have made bookings despite the crisis, the firm’s top management is frustrated.
Chief Executive Officer of Royal Enfield, Vinod K Dasari recently said, “We are quite excited on the demand side, but a little bit frustrated on the production side. We are limited by supply chain and not by capacity.”
Although, the Centre has relaxed several restrictions it had imposed back in March, the problem is that many State governments have yet to let go of the curtailment of vehicle and human movement to the degree that the Centre has deemed it fit.
Since the 2-wheeler industry largely depends on Aurangabad, Chennai, Gurugram and Pune for supply, and Tamil Nadu being the only State to have imposed the e-Pass system to even cross districts within its boundaries, Royal Enfield supply chain has not recovered.
Dasari put it modestly by saying, “If one of the areas goes into lockdown, it disrupts everyone, not just one.” Eicher Motors, the 2-wheeler major’s parent firm, (like many other automakers) reported a net loss of Rs. 55 crores in the first quarter of FY20-21.
But, not all is bad, since Royal Enfield, as stated above, has a good number of bookings in its hands. Demand has rebounded, led by increased interest from tier-2 and 3 markets, with tier-1 market to join the bandwagon once lockdown restrictions ease.
Moreover, online enquiries have gone up by four to five times compared to the pre-COVID-19 levels as well. All this points to a promising future for Royal Enfield, which recently revealed that it is working on an electric motorcycle as well.
Source – Bloombergquint.com