Eicher Motors Ltd

NSE:EICHERMOT

Earnings Call Analysis

Eicher Motors Reports Record Quarterly Performance Amid Launches and Market Expansion

Eicher Motors reported a robust start to FY '25 with a record revenue of INR 4,393 crores, a 10.2% increase over the previous year. EBITDA also hit a peak at INR 1,165 crores, up 14.1% year-on-year, with a margin improvement to 26.5%. Royal Enfield sold 207,736 motorcycles, including notable international growth. New launches like the Guerrilla 450 and Himalayan 450 have been well-received. The company's customer-centric initiatives and sustainable practices are showing positive results. VECV achieved its highest-ever quarterly sales with significant growth in heavy-duty and light-duty trucks, supported by strong market demand and innovative joint ventures.

Introduction and Overview

Eicher Motors Limited (EML) began the financial year 2024-25 on a high note, achieving its highest-ever quarterly revenue, EBITDA, and profit after tax. For the quarter ended June 30, 2024, the company reported consolidated revenue of INR 4,393 crores, reflecting a 10.2% increase from the same quarter last year. The EBITDA stood at INR 1,165 crores, up 14.1%, with an EBITDA margin of 26.5% compared to 25.6% in the same quarter last year. Net profit rose 20% to INR 1,101 crores .

Royal Enfield Performance

Royal Enfield, a flagship brand of EML, saw total motorcycle sales of approximately 207,736 units, compared to 225,368 units in the same quarter last year. Despite a dip in overall sales, retail sales in India for April to July 2024 showed continuous growth over the previous year. This growth was achieved amidst dampened consumer sentiment due to extreme weather and general elections. The company transitioned to an auto-replenishment model to better manage motorcycle availability and lower dealership inventory .

International Market and New Models

International sales for Royal Enfield saw a significant boost, with volumes reaching 23,050 units, marking a 26% growth year-over-year. New model launches, such as the Super Meteor and the Himalayan 450, received excellent responses in various markets, making Royal Enfield one of the top four midweight motorcycle brands in several countries including the UK, Italy, Thailand, and Australia. The newly introduced Guerrilla 450 has also garnered positive feedback globally .

VECV Performance

For the first quarter, the VECV segment reported revenues of INR 570 crores, compared to INR 498 crores in the previous year. The EBITDA was slightly lower at INR 384 crores compared to INR 387.2 crores last year, with an EBITDA margin of 7.7%. However, profit after tax (PAT) rose significantly to INR 319 crores from INR 180.5 crores, attributed largely to the write-back of deferred tax under the new tax regime. VECV achieved its highest ever first-quarter sales of 19,702 units .

Commercial Vehicle Market Outlook

Despite a slower start in the commercial vehicle market due to the monsoons, VECV performed well, outpacing market growth. With expected economic growth exceeding 7% and substantial government infrastructure spending, the commercial vehicle industry is poised for continued growth. VECV's market share in light and medium-duty trucks reached 38%, and it continues expanding its product range and dealer network .

Customer and Market Initiatives

Royal Enfield continues to focus on customer engagement through community events and rides. The company launched the borderless warranty program and is progressing with its sustainability mission, evidenced by the launch of green pit stops managed by local entrepreneurs. Investments in marketing and brand building are planned to heighten brand awareness, particularly for new models like the Hunter and Classic .

Challenges and Market Conditions

Despite positive developments, the company faced challenges such as dampened consumer sentiment due to extreme weather and elections, which affected demand. However, new product introductions and strategic initiatives aim to overcome these hurdles, positioning the company for continued growth in both domestic and international markets .

Conclusion and Future Outlook

Eicher Motors Limited is well-positioned for sustained growth, driven by strong performance in both its Royal Enfield and VECV segments. With strategic initiatives in place to enhance customer engagement, improve inventory management, and expand market presence, the company looks forward to a promising year ahead. The focus remains on leveraging new product introductions and maintaining its market-leading position .

Earnings Call Transcript 2025-Q1

[Operator]

Good evening, all participants. Welcome to Q1 FY '25 post result conference call of Eicher Motors. Thanks to the management for giving us the opportunity to host the call. We have with us the senior management to be presented by Mr. Vinod Aggarwal, CEO of VECV. Mr. B. Govindarajan, CEO of Royal Enfield; Mrs. Vidhya Srinivasan, Chief Financial Officer at Eicher Motors Limited and the rest of Investor Relations team. So without wasting any time over to the senior management for their initial comments.

[B. Govindarajan, executive]

Hello, everyone. Welcome to the Eicher Motors Limited earnings call for the quarter ended June 30, 2024. Being slightly under the weather, [indiscernible] was not able to join the call today. So I will begin with the broad-level EML summary before getting into the updates for Royal Enfield.



After an excellent FY '23, '24, we have begun this financial year in a very strong note. We have registered our highest ever quarterly revenue, EBITDA and profit after tax and marked a significant milestone both at Royal Enfield and the commercial vehicles, which we will go through in a while.



Last week, we released our annual integrated report for EML for FY '23, '24. We hope all of you have had a chance to go through it. In addition to the performance and highlights, the report captures our ESG vision and our consistent work and efforts towards achieving it. This year, we have also published the Royal Enfield Sustainability Journal, showcasing a selection of stories from our sustainability journey across our social mission programs and green business operations.



Now coming to the consolidated financial first quarter FY '24, '25. Our revenue, EML clocked its highest ever quarterly revenue at INR 4,393 crores, marking a growth of 10.2% over INR 3,986 crores from Q1 of last year. Our EBITDA was at INR 1,165 crores, once again our highest ever quarterly earnings, up by 14.1% from INR 1,021 crores in Q1 last year.



EBITDA margin for the quarter stood at 26.5% as against 25.6% last year at INR 1,101 crores, which includes INR 175 crores of EML share of profit from VECV, up by 20% from INR 918 crores in Q1 last year.



Now I will first talk all through the business highlights for Royal Enfield before I hand over to Mr. Vinod Aggarwal for updates from VECV. As far as Royal Enfield is concerned, after registering a still a performance in FY '24, we have had a good start to FY '24, '25 to begin with it. Let's look at the performance for this quarter.



Our total sales stood at about 207,736 motorcycles in this quarter as against 225, 368 in Q1 FY '24. In India, we sold 204,686 units in Q1. The retail continues to grow in April to July 2024 for Royal Enfield over last year in the domestic market, despite the dampened consumer sentiments, owing to extreme weather and gentle elections.



Also, we completed the transition to auto replenishment model during this quarter. This helps us to enhance the motorcycle availability to the end consumer, while at the same time, lowering the inventory buildup at the dealership, which we'll also discuss. In the international markets, our volumes stood at 23,050 units, marking a growth of 26% over last year. Our retail volumes have increased steadily in these markets. Amidst an uncertain macro backdrop, we steadily improved our position in key international markets over the last 1 year and maintained our market share and position in these markets.



We are now among the top 4 midweight motorcycle brands in many countries around the world, such as U.K., Italy, Thailand, New Zealand, South Korea, Australia and Continental Europe. We launched the Super media and Himalayan 450 in several international markets now, and these models have garnered excellent response from all our consumers.



Last month, we also launched the Guerrilla 450, our premium Roadster on the Sheba 450 platform. We had our first global media right and launch at Barcelona amidst global press and experts. The motorcycle marks a bold evolution in our Roadster lineup designed and developed alongside the Himali and our adventure tutor on Sheba 450 platform. The Guerrilla is an absolutely gorgeous motorcycle. It is unique in design and mechanically characterful.



We have had great feedback from World Press and from writing communities across the globe. We've continued to bring engaging rights and events for our community. We have also opened registrations for motors 2024 and have already received thousands of registrations from our communities across the globe.



Earlier this week, we celebrated 20 incredible additions of pure more cycling by flagging off our most iconic ride Himalayan OTC. For 2 decades, the Royal Enfield Himalayan OTC has been more than just a journey. It's been a symbol of adventure and relentless human spirit.



In keeping with our sharp focus on customer centricity, we introduced first-of-its-kind service for our customers, the borderless warranty program backed by a network of over 3,000 plus Royal Enfield authorized touch points in 70-plus countries. This program offers a number of services under warranty across anywhere in the world for our adventurous riders, ensuring convenience and peace of mind.



On our sustainability, social mission and CSR journey, we launched our first green pit stop, Camp Kharu in Ladakh managed by local women, Camp Kharu will help foster local entrepreneurship environment, sustainability and promote intangible cultural heritage protection, all in the differentiated way. This is the first of many plant in the popular riding roads up in the hills.



On our environmental, social and governance ESG mission, we have made steadfast progress. Over the years, we made significant efforts to design and develop our motorcycles in concurrence with principles of circular economy. Our motorcycles are designed for more than 97.5% of recyclability and reusability and then activities intensely continuing.



Over the years, our plants now consume 36% of electricity from renewable sources and are net water positive to the tune of 2.6x. We are also committed to send no west to landfills from any of our operations. Looking ahead, we have an exciting year full of new launches after the Guerilla 450 launch. We are now excited about upcoming new classic launches. We are focused on maintaining this momentum and continuing to grow as per our business plan.



Now I will hand it over to Mr. Vinod Aggarwal to take you through the VECV performance and updates. Over to you, Vinod.

[Vinod Aggarwal, executive]

Thank you, Govin. Good evening, everyone. I am happy to inform that at VECV, we recorded our highest ever first quarter sales of 19,702 units in quarter 1, 2025 financial year. As you have seen, the Indian economy has remained resilient through this period of geopolitical turmoil elections and monsoons, economic growth, including government investments in infrastructure spending is supporting the VECV demand across all key sectors.



VECV continues to maintain its growth momentum in the VECV industry with best ever first quarter milestones across all segment. Eicher heavy-duty trucks, we had the highest ever first quarter sales of 4,689 units as against 4,662 units last year first quarter and market share of 8.4% with Eicher brand. Light and medium-duty trucks, first ever -- first quarter sales of 7,842units. Financial year, '24 quarter 1 was 8,308 units, and we had the market share of 34%.



Bast vision, we had the highest average sales of 5,232 units in the first quarter and financial year quarter 1 was 4,842 units. Exports in quarter 1 grew to 992 units, registering a robust growth of 57.5% over Q1 of financial year '24.



We continue to launch new products and variants addressing market needs. Our small commercial vehicle program showcased at the Bharat Mobility in January is on track with preproduction vehicles undergoing customer trials in real-world operations.



During the quarter, VECV also formed a joint venture with iTriangle Infotech, which is now called VE Connected Systems to develop and commercialize next-generation round services linked to the transportation business. This joint venture will leverage our industry first 100% connected vehicle ecosystem and serve as a development factory for segment-specific embedded and digital solutions to serve Eicher customers.



Now coming to VECV financial performance for the first quarter, we had the revenues of INR 570 crores against INR 4980 crores last year quarter 1. We had EBITDA of INR 384 crores as against INR 387.2 crore last year. Our EBITDA margin in quarter 1 is 7.7% against 7.9% last year. Our PAT for quarter 1 is INR 319 crores against INR 180.5 crores last year.



[indiscernible] has significantly increased because of the write-back of deferred tax because now we have opted for the new tax regime at 25% tax rate. Earlier, we were at 35% tax rate. So the excess tax which was provided earlier under deferred tax that has been reversed. Basically, we were continuing under higher tax regime because we had the unutilized MAT credit. So that credit has been completed last year. That's why now we opted for the current tax regime of 25% tax. So due to that, our PAT for quarter 1 is much higher than quarter 1 that of last year.



So back to you, Govin.

[B. Govindarajan, executive]

Thanks, Vinod, sir. Can we start the Q&A session, Aruba?

[Vinod Aggarwal, executive]

Yes please.

[Operator]

Yes. So participants kindly raise your hands to ask questions. So first question is from Pramod Kumar.

[Pramod Kumar, analyst]

Yes. Sorry, I didn't realize and thanks a lot for the opportunity. So the first question is on the demand side. I think Govin get your insights here. Because what we're seeing is in a very broad-based premiumization trend across industries and sectors in India. For some reason, the premium motorcycle category as the way you define it, about 250 is not seeing much of trust as such, despite entry of called, Triumph and even some of your product action as well. So just want to understand, given your extensive customer engagement, what you do, the kind of interaction you guys have at the dealer level and the riding levels as well.



So what -- if you can just help us understand what explains this phenomenon? Is it just affordability, which is kind of really broken here? Or are we seeing down trading? Or if you can just help what are your findings when you go check in the market as to what's happening? So that's the first question. Sorry for the long one, but yes.

[B. Govindarajan, executive]

Yes. No, I was expecting that will be the first question Pramod. Let me just give you the context of the whole thing. India business, what is happening as of now. Currently, the 2-wheeler industry and the commuter segments are seeing some very good catch-up and part of the Covid time level because that's what it was not catching up. Now we're just catching up. We could see it.



In fact, I was just going to the data to put that straight, we have surpassed the pre-COVID levels in FY '24 itself. While many of the segments are just seeing the growth from the base, which they are catching up. Middleware what is happening, the middleware, the entire motorcycle, which has seen only almost about 4, 4.5 percentage of growth over the first quarter of FY '24. If I have to say there's so much of action which was there in that middle weight, so many new entrants, a lot of store additions, not many actions which were there. In our understanding, it's a period of the whole confusion settling, sometimes the deferment can take place because there is a bombardment of so much of an information which comes in about as an alternative. But currently, whatever is the claim, which was there I can tell you, I think Royal Enfield could able to do a very good retail. In fact, we are at a low single digit in the retail during this window. So that's a positive sign, which we are seeing.



When the market is growing when your retail is better, there is also on the wholesale, probably we could have done more, but we also took a conscious decision because we went in for an auto replenishment model. So right product at the right location. So we have to do a consolidation of that. And we also have something which is going to happen very exciting and classic. So the inventory build should not take place in those areas. We were also cautious about it.



As I mentioned, the whole middleware motorcycle as of now, has to pick the pace with respect to the rest of the motorcycle, which I see with all our actions, which are coming up and the too much of a noise which was there is slightly settling down. Very positive, it will start picking up in a few months' time Pramod.

[Pramod Kumar, analyst]

So would we still kind of aspire to have a high single-digit growth for the said category as a whole for the year?

[B. Govindarajan, executive]

I think, yes, directionally, because premiumization is continuing. And so that's the -- there is no indicator which shows that this will not grow. I'm confident that it is going to actually grow. And our new products, as I mentioned, because the market also had to be grown, which we will be continuously working. Our classic, which is going to see a lot of actions where the focus is going to be. On Hunter, we are going to do a lot of brand building exercise. And on top of it, now we have launched the Guerrilla 450. It is just about a week, 8 days old in the market, which is also getting a very good traction. That's why I see in the coming months, the growth pattern will be back.

[Pramod Kumar, analyst]

And Govin second question, leading into Guerrilla. So any plans for introducing Guerrilla as a trial product for a lot of your existing riding groups, what you have or which have many of them are voluntary, some of them are run by the dealers. Because there's one feedback which you get from dealers is that what help early connect to the customer back in the day during in say IT and other areas was the lending the bike for customers to ride for -- on an exponential basis.



So is there a plan to introduce 450 to the existing customers and see what -- how they respond to that product because that's a very big untapped customer base we have of several million of them, right? And is there a plan to kind of use this product to go back to them because this is something which can be used for commuting, this can be used for touring, has got all the performance is a world-class product in terms of specs. So any plans of rekindling that customer connect in terms of weaken riding and all of that? Is there any plans on that?

[B. Govindarajan, executive]

Thanks. I mean I don't need to explain, I suppose. Obviously, community connect and making community to enjoy our motorcycles, we always try to find very innovative ways of reaching out to them and give them a frictionless experience of our pure motorcycling. And as you are also mentioning, one as such action is also reaching out to them and trying to get them onto the saddle of Guerrilla and they will really enjoy the Sheba platform's potential, which is there on a Roadster, which will actually help us to tap the market.

[Pramod Kumar, analyst]

And any booking numbers you're saying Govin on this or potential volumes, what you can do once ramp-up is done across domestic export?

[B. Govindarajan, executive]

Platform as a whole, if I had to tell you Pramod, which is what, 6 months old 6 months young baby, it is almost about 8,000 to 8,500 numbers per month is what we are tracking.

[Pramod Kumar, analyst]

This is just the Himalayan, right? Am I right?

[B. Govindarajan, executive]

Because Guerrilla is on the ramp-up.

[Pramod Kumar, analyst]

So 8.5% is with Guerrilla, part of Guerrilla or it's excluding guidance.

[B. Govindarajan, executive]

Part of Guerrilla also.

[Pramod Kumar, analyst]

And if I were to push you on that, Govin, where would you think or at what level, if you don't hit what levels, will it kind of disappoint you?

[B. Govindarajan, executive]

Look, I think if this question had been asked to us in about a few years back, what would be the middleweight total number, and if I have said some numbers, I would have not been very happy because we always felt that the market can be grown.



Our fundamental belief is we can grow the market, and we feel here is -- it's a fantastic platform, which we have created. The first adventure tool, which we have created a category in almost about 6 months of its launch, we have crossed almost 32,000 motorcycle sales as of now, the Himalayan. And now Guerrilla also the same way which we are talking about. We do see there is a good potential for it, but we have to ramp up on the production, so which is also happening. And already we shipped almost 6,000 across India and international. The demand is high. It's in a positive note Pramod.

[Operator]

The next question is from Chandramouli.

[Chandramouli Muthiah, analyst]

My first question is on the VECV PAT number that was discussed. You said that there is a write-back in the deferred tax, which I'm assuming is one-off. But going forward, would it mean that the tax rates on VECV will eventually be assumed at 25% going forward versus historically, that was 35%. So is that sort of a structural 10% sort of Y-o-Y improvement in profit opportunity in VECV going forward?

[Vinod Aggarwal, executive]

Yes.

[Chandramouli Muthiah, analyst]

Got it. That's helpful. My second question is related to Guerrilla capacity. So I think over the past couple of quarters, as the Himalayan has been getting introduced into more markets globally, you did mention that you had to keep upgrading production capacity on the Himalayan 450. So just trying to understand when you are planning production capacity for the Guerrilla, which is slightly more affordable platform -- I mean, affordable price point on the same Himalayan platform, just trying to understand how you're thinking about production capacity in your current 1.2 million units annual capacity that you have just for these 2 parts?

[B. Govindarajan, executive]

No. Overall capacity is 1.2 million Chandramouli, so 1.2 billion to 1.3 because capacity can be moderately increased as far as the [indiscernible] platform, 452cc engine platform. We are -- as I mentioned, we are almost cracking 8,000-plus units, and [indiscernible] just got launched. But as in international markets, it will get launched over the period of time. We are not a company wherein we will put the capital and wait for it. We will always be looking at and how they respond and how do we actually enhance the capacity. But all the actions are there, and that's how it is slowly catching up.



I mean in case I have to tell you, even our 650cc platform from the time when we launched to now and the capacity unlock which has to happen, that also has been consistently happening, and we keep investing on debottlenecking the specific suppliers and ramp-up of production. So we will -- we can -- we will and we can comfortably supply the K platform also according to the market demand in the next 1 or 2 months' time.

[Chandramouli Muthiah, analyst]

Got it. That's helpful. And my last question is on exports. So this seems to be the first quarter of wholesale growth in exports over the past 5 quarters. So would you say that the export markets are now turning a corner for us now that we are able to introduce more and more 450 and 650cc models in a broadening range of markets.

[B. Govindarajan, executive]

Look, I think exports, there is -- even still I have to tell you, the sentiments are not the way we are expecting even in the international markets. But what has happened is last year, we had our inventory corrections and all those things which we have done up. And now -- as I mentioned last call also, we won't look at the wholesale as the primary key indicator for us. We'll always be looking at is there a retail traction. In Q1 FY '25, our retail sales have increased over Q1 FY '24, that why our wholesale also has been becoming better.



I do see green shoots in the international markets. It's slightly opening up, but we are cautiously optimistic about the international growth, which is coming in time at Chandramouli.

[Chandramouli Muthiah, analyst]

Got it. All the best.

[Operator]

Next, we have a question from Arvind Sharma.

[Arvind Sharma, analyst]

First on the classic since you said the 2024 Classic is coming. Could you share some highlights with us? Is it just cosmetic changes? Or what are the kind of changes that you expect on the new model version?

[B. Govindarajan, executive]

Look, I think classic for us, it's a very important product that has actually opened up for our own growth. We had a lot of low consumers had a lot of flow. It is really, really the product which changed the oil in field in the global arena. That hasn't seen any major changes in the model since the launch of the classic rebound, which we did in 2021, when we were doing the J platform transition.



For the classic, the brand track study, which we normally do, it is showing it is quite strong in all -- across all pockets in India. So there are -- if I have to tell you, there are a lot of many firms and clones trying to take a stab at it. The model is very decline and continue to lead the segment.



Now what we are looking at is, we are working on very exciting updates, collaborations. You will see all those things getting announced within a short span of time where you will see a Royal Enfield is now getting into the classic in a very different note. So we'll wait for another day weeks.

[Arvind Sharma, analyst]

Sure. Second would be on the Hunter had a good volume and first launch, but over last few quarters, the volumes have kind of stabilized. You did allude to some action there as well. Will it be primarily marketing and rising driven? Or in the hunter also, you are planning some update to the product?

[B. Govindarajan, executive]

Hunter, I think we all know it has created a big mark in the segment and made a very good foothold in the young first-time motorcycle buyers. That's what we were looking for. And the model has a very strong identity of its role, and it is not impacted by the motorcycles of any other brand.



The first time buyer market is a bit muted, as I was mentioning, and we are trying to improve the model spontaneous awareness because we launched it in August '22. It's almost what? It's about 1.5 years old new brand. So there will be a lot of marketing activation activities, which we will see it in time to come. But the good news is, and we are constantly working on the product also. You will see something out of that which is happening even on the Hunter, what sort of a collaboration, which we are doing. In fact, we did a collaboration with the human. We did a collaboration with Spotify. And all those collaborations are also really, really helping because it's a brand building exercise, which we have to do to attract the younger consumers who have to come in. So the associations are also getting done in that way. So it is going to be more on brand building, market activation activities and getting the young consumers and first-time buyers to their customers. You will see those actions in the next few months, which is rolling out.

[Arvind Sharma, analyst]

Just one more question, if I may, try my lack here. Apart from the product revamp in Classic, is there any other product that you plan to launch over the next, say, 6 months to a year? Any white speed that you've identified and you want to fill that up?

[B. Govindarajan, executive]

I'll come back to you, Arvi.

[Operator]

Next, we have a question from Gunjan.

[Gunjan Prithyani, analyst]

I'm going to extend on the same topic was which Arvind was getting into. In terms of a lot of actions, I think what you spoke about Hunter and Classic is again, a lot of thought around brand building. I mean there's no doubt that this brand is very, very credible. And what you've done is it's difficult to replicate. But what I'm trying to get at is how do you get the customer to convert. There is interest in the brand. So what is it beyond these refreshes that we're looking at over the next -- and my question is not 6 months. I'm just wondering from next 2, 3 year perspective, how should the product portfolio change so that we can be very confident about double-digit growth?

[B. Govindarajan, executive]

Well, Gunjan, I think it's a very pertinent question for a brand which has got launched, where do we see how is it going? Probably, I have to give it with an example. Any brand or any of the general which we , let me take the Himalayan as an example. In 2014, when we launched, at that point of time, the category was not there. People are not able to relate to. And when we were doing it, we took almost about just sharing the number on the Himalayan sale, right, the Sheba platform. It took 37 months for us to cross a 30,000 numbers. We were building the brand, we were trying to see.



Now when we launched the new Himalayan, we crossed the 32,000 mark in last 6 months. Now you can see it takes time to build a brand. But when you're building it, then what happens is the growth comes in at a disproportionate level. Hunter, as a product, we wanted to attract the young consumers and first time people who are not the Royal Enfield regular customers who are looking for the brand Royal Enfield in a different format. That's what we brought in Hunter. I think it has given us quite a good start under yes, sustenance.



Now what is more importantly when we do the brand track study in all those areas, in the rural market, still the brand salience is to be improved. So we have to do a lot money activities in the brand building. Second, in the urban market, what we are trying to do is now we are working with all the colleges and having a college connect to the young people. Thereby, they can get into the motorcycle, and there are different methodologies with which we are trying to work around to get the College Connect as a major program. And the Hunter secondary is also going to be getting over. You will see the Hunter right across the country. So thereby, more attractions have to come in and the collaboration, which is required for the youngsters to relate it to that, yes, I relate to the product. So it's a brand-building exercise won't have to do.



But the belief is that this product, the way we wanted to land has landed. It started getting us the young consumers, first-time people. And that set is very huge. So let's continue our work in a sharper way, which eventually will get us a good number. That's the belief, and I think it is showing signs.

[Gunjan Prithyani, analyst]

That's quite helpful. I think Hunter clearly has a lot more potential. So we'll watch out for the scale up there. My second question was on the Guerrilla numbers that you mentioned and maybe I got them wrong, 85 -- sorry, 88,500 for the Sheba platform. Now this includes the Himalayan and a little bit of ramp up that you would have seen for Guerrilla. Is that understanding right? So my sense is 6,000 was the typical run rate that we were seeing for Himalayan. And incrementally, we are now in the ramp-up stage for Guerrilla. That's the way to think about it.

[B. Govindarajan, executive]

Yes, you're right. And it is about a -- and it is a last in this world in the market.

[Gunjan Prithyani, analyst]

Yes. Okay. Got it. And is there any insights to share as to how this product has landed? I mean is it -- or how you are trying to position this? Is it the mix of inquiries that you're seeing are people who are buying Royal Enfield for the first time? Or is it replacement, which is where this is landing more. So some thoughts on the positioning of the product from your perspective?

[B. Govindarajan, executive]

It is a very early stage to say whether there is all times -- I mean, the existing consumers are upgrading or the new guys are coming in. But I can tell you, in the world when there are so many roads tests not having an identity, Guerrilla has brought in an identity for itself. And the start is very strong, and the reviews by all the people who rode the motorcycles, I'm sure you all would have seen it. It's all across the globe, it's very good. And it is on the Sheba 450 potent platform. So it's a roadster it's a take from Royal Enfield type of a roadster. You will see that positive trend, which is coming up in the Guerrilla, Gunjan.

[Gunjan Prithyani, analyst]

Okay, last question...

[Operator]

So Gunjan, please come back in the que.

[Gunjan Prithyani, analyst]

No problem.

[Operator]

Yes. So next, we have Mr. Kapil Singh.

[Kapil Singh, analyst]

Just one question on, we saw a very good improvement in the average selling prices. So if you could share some color there that was it driven purely by mix? Or you're seeing higher growth in spare parts and accessories? Some color there? And also now that if you could also talk about the increase in pricing or commodity movement that you would have seen recently.

[B. Govindarajan, executive]

Yes.

[Vidhya Srinivasan, executive]

So Kapil, so I think as you rightly surmised, I think the growth in selling price is a function of 2, 3 things. One is, of course, the product mix because we have greater than [indiscernible] that share is going up. And also, we've had an increase in the share of international markets, which also is kind of contributing. So it's a combination of these 2 factors, which is driving up ASP. We have not taken any price increases, as you know.



As far as commodity is concerned, I think we've got an impact of about 0.6% as far as commodity is concerned. So that benefit is flowing through in the GC.

[Kapil Singh, analyst]

Great. And just on the spare parts and necessities, that is...

[Vidhya Srinivasan, executive]

Yes. I think that also has -- the share of spare parts and at least are doing well, continues to be trending at around 15%. So that also obviously -- but not necessarily on an ASP level, but certainly helps us from a GC standpoint.

[Kapil Singh, analyst]

Okay. And just second, a more broader question on the demand. There were some factors that you mentioned in the first quarter, like elections and heat waves that affected demand. So now that all of these factors are over, is there some kind of improvement in demand that you're noticing? And also, last time, we talked about double-digit growth for the metered segment. This time, we were talking about single digits. So has there been some change in growth expectations?

[B. Govindarajan, executive]

There's no change in the growth expectation per se. As I mentioned, the middle weight in the first quarter. You all know there are so much of noises and actions which are there. It's all settling down.



And our new products like Guerrilla, it is going to hit the market now festive season is catching up. We are going to do a lot many work on classic. We have a lot of brand building activities and market activation activities, which are picking up in Hunter and in media and all the products are GT cap, which has happened, which has brought in quite a good eyeball and interest on the Continental GT. So all those, which tends to make me to think and believe confidently that the market is going to come back within a short time in a good growth rate.

[Operator]

Next, we have a question from Ragu.

[Raghunandhan N. L., analyst]

Sir, firstly, on the bullet volumes, there has been some decline of IT. How do you see the improvement here in the future? You have new generation bullet, how are people accepting the product? Is there any worries relating to higher pricing of the new generation removal of kickstart or the design -- just trying to understand what is restricting the acceptance here?

[B. Govindarajan, executive]

Raghu, for Bullet, when we launched, there is always -- these are all the discussions, which will come and we launched, it really had a very good start, and it had a good acceptance of the new bullet in Southeast, Central and West regions. There are a few regions, which used to be the best in market for the bullet. There, we saw a little bit of slowness in the growth of bullet because that's where the bullet is very important also for us. Then we did a deep dive and we understood that there is a product intervention, which is required for those sort of Bastian market, which we have already started working on, and it will all be there well before the festive season in those markets also. So you will see the bullet also picking back to the growth, which we launched.



But I must tell you, bullet in the market which was not doing well, especially in UP Maharashtra, where we really wanted that to get acceptance. It has really increased and acceptance has been very good.

[Raghunandhan N. L., analyst]

And on the exports outlook, which regions are currently doing well for you and which regions are yet to recover? And also, if you can remind the broad breakup of exports across Europe, North America and Asia.

[B. Govindarajan, executive]

In the international markets, especially the LatAm is doing very well because our CKD plant is also fully in operation. And Europe started showing good signs. That's an another one market. APAC is just picking up. Individual areas, we will -- we can send you the numbers, but our market share in those areas, as I mentioned, retails have been very good. It's in the high single digits, and that is continuing.



And we are seeing a green shoot in the international markets. And that's why -- and also in the international market, I have to give you for a bit more understanding for everyone is what happens is, in fact, our super media, which we launched almost about a year back, we are just launching in a high number of markets like Brazil and all because it takes time for the homologation, different things which are there. We have to time the market. There is a riding season, nonriding season all together. So our products will be entering into those markets only now on. So to that extent, the international market, I see the growth is going to be better than this year.

[Raghunandhan N. L., analyst]

To Vinod, sir, if you can talk about the CV industry volume outlook, Q1 had some impact of elections. How are you seeing the demand rest of the year? And Eicher has been doing well on the market share part. How do you see the focus on market share gains and also your thoughts on current level of discounts.

[Vinod Aggarwal, executive]

As far as the commercial vehicle market is concerned, I think first quarter and first, you can say, July month and as well as this month also because of the monsoons market is right now not doing so well. Even first quarter, also even though the growth looked good at 10% in first quarter. But that also we have to see that. The last year first quarter, the numbers were very base was small because we had just moved to O2, and there was a lot of preponement of sales to quarter 4 of you can say, 22%, 23%. So due to that, the growth that you look in quarter 1 also, it's not -- I would not say a good growth. And July, of course, the market has dropped. However, going forward, we are very positive. The fundamental regions are very clear that, firstly, the economy is expected to do well. We are still talking of 7% plus growth in the current year. And then huge money is allocated for capital projects, 11 11 lakh growth.



And we should also note that due to elections, nothing much has happened on the investments on the capital spend from government. And of course, now it will also be a challenge that they will have to do this entire spend in the remaining part of the year. So therefore, still, nevertheless, the good spend will happen in balance part of the year.



And then, of course, September onwards, there will be festive season starting in and replacement demand is expected to remain strong. So therefore, I'm very positive as far as the balance part of the year is concerned. Commercial vehicle industry should continue the growth. And even though the growth may not be very strong because there are also a lot of structural changes happening. For example, in heavy-duty trucks. A lot of migration is happening towards higher payload trucks. That also results in reducing the number of trucks. But on the other hand, for all other fundamental factors which are in place, the industry is -- should be doing well.



Now as far as we are concerned, you have seen that we have been outpacing the market consistently. And even the month of July, also our light and medium duty truck market share was 38%. And in fact, we're consistently improving our market share and heavy-duty trucks also, we are continuously improving our market share.



But see also we are getting good growth. So therefore, I think we are expected to continue to do like that because one is that we are expanding our dealer network. We are opening more and more dealerships across the country, and that is also helping us to do -- to enter into the territories where we had been weak earlier. So therefore, that is also helping us.



And then, of course, we are also continuing to expand our product range. So we are getting into more and more applications and more now segments. So therefore, we are expecting that we should do well. As far as the discounts are concerned, of course, there have been improvements. We have seen the results of 3 other companies. They have done -- they have shown better margins. Even, in fact, our margins are still low. They are continuing to be almost at the same level as we were last year.



I think there the reason is that my own belief is that when the heavy-duty trucks go up, the competition improved margin because they are making better money in heavy-duty trucks. So that is the reason. Otherwise, I think the discounts also should come down. So we are very positive that price management is going to play a very big role in the improvement of margins in the entire industry, and we are very optimistic.

[Raghunandhan N. L., analyst]

Thanks for the comprehensive answer, wishing you the best.

[Operator]

Next, we have a question from Jinesh.

[Jinesh Gandhi, analyst]

First, clarification on Guerrilla volume. So you said BX shipped 6,000 units so far. This is reflecting in July or this is starting from August.

[B. Govindarajan, executive]

It will start reflecting partial quantity in July, but it will start reflecting more in August.

[Jinesh Gandhi, analyst]

More in August. Got it. And you talked about auto piece model shift to that. So can you talk about what -- how it was earlier and what changes and did it have any influence in our wholesales in the replenishment?

[B. Govindarajan, executive]

Yes, Janesh, I think you've got it. Auto replenishment is on the replenishment model. So earlier normally is almost about the forecast model. So there will be a dealer focus. There will be a sales forecast and everything gets aggregated for an MRP brand, and that's how we used to do the entire production. The production plan is against an intent. So now what we are doing is that all have to go away because no one knows exactly at what model is required at what point of time and the dealer profitability to be protected. So what we have done is we have gone in for the theory of constraint-based replenishment model. That is what we implemented in spare parts as a business almost about 2 years back, which has showed us extensive gain as a business to us and to the dealer partners also.



So to that extent, it will -- it had some impact on the wholesale because we never wanted anything which is left on an intent based. Otherwise, what will happen is the motorcycles have to be moved from one place to one place. So to avoid all those things when the replenishment model was being cut over as a system, we are also cautious about building the inventory there by the wholesale.

[Jinesh Gandhi, analyst]

Okay. And what kind of impact it would have on the recent one wholesales?

[B. Govindarajan, executive]

Percentage term, I will come back to you because we are still assessing about the availability of the motorcycle at that place. And because the festive season is coming. As a result, there will be always a multiplayer for our festive on the inventory holding. We are just doing it.



But the intervention which you have taken that inventory bill should not happen. And we maintained our dealer inventory only within about 2, 3 weeks. So we haven't increased -- you would have seen in the channel check everywhere. We have actually looked at keeping the inventory in the check during this time.

[Jinesh Gandhi, analyst]

Got it. And again, you talked about 60 basis point benefit of commodity. This is on Y-o-Y basis or on a Q-o-Q basis?

[Vidhya Srinivasan, executive]

Yes, Y-o-Y basis.

[Jinesh Gandhi, analyst]

Q-on-Q, would it be largely stable or there would be some benefit on Q-o-Q as well?

[Vidhya Srinivasan, executive]

I think largely stable, I would say.

[Jinesh Gandhi, analyst]

Okay. And you expect this to go up given commodity prices for some of the commodities have been changed...

[Vidhya Srinivasan, executive]

I think I could take a brave process than we do. Predict commodity prices right now.

[B. Govindarajan, executive]

I think aluminum is showing a bit of a pressure point. But what is happening is we have launched all the platforms. So the J platform, K platform, P platform, all those things which are launched. So the VAVE will start kicking in. So it will also help us over the period of time.

[Jinesh Gandhi, analyst]

Got it. And given we are looking at brand activation across models, should we expect a material increase in investment in marketing and branding going forward?

[B. Govindarajan, executive]

Which is actually planned Jinesh. So that's all planned in our P&L for the whole year. So you will see our investments, which will be there, but there will be an increased spend on the marketing and brand building to build strong awareness for the products which we talked about. That's also part of our rebalance, which we mentioned, the growth is the mindset with which the organization has to go. And that's how we will see more activations, which will be taking place in time.

[Operator]

Next, we have a question from Amyn.

[Amyn Pirani, analyst]

Yes. I just wanted to go back to the Himalayan. While you are doing -- and this is more regarding the domestic market, you are doing close to INR 3,000 a month. If I see the new Himalayan is doing as much volumes as the older Himalayan was doing. So my question is, a, is this something that you were anticipating? Or is -- are there any reasons why despite a completely new Himalayan and a much improved product the volumes are still flattish compared to the outgoing model.

[B. Govindarajan, executive]

Amyn it's -- the Himalayan as I mentioned, in the 6 months time of our launch, we have almost crossed about 32,000, including domestic and international. In a new product like this, because it's a new platform for us, okay? When it is launched and the existing 411 which had been there in the market, people do get it it's an evolution, but the market will always be looking at initially how the product behaves. How is it getting accepted. And consistently, the growth, as you're also mentioning reaching the older numbers. And now from there to go, initial consumers have to be very happy. That way this platform has got very good acceptance in the market. The product got very good acceptance., and everybody could be able to link and desire to ride the Himalayan at the Himalayas and it is catching up. It's a bruceleein adventure most cycle category, which people are experiencing it. So that's how the growth will take place. It's in the right track. Let me put it like that Amyn.

[Amyn Pirani, analyst]

Okay. And just going back to the Hunter, I think you earlier in the call mentioned that you were getting a decent amount of first-time buyer. So I just wanted to clarify, when you say first-time buyer, are you saying like past time 2-wheeler buyer because...

[B. Govindarajan, executive]

Yes.

[Amyn Pirani, analyst]

Okay. Because Hunter is still expensively priced. I mean it's cheaper than your classic and bullet, but it's still a very expensive product.

[B. Govindarajan, executive]

Yes.

[Amyn Pirani, analyst]

Broadly, what proportion of Hunter would be -- I mean, first-time buyer, if you can give us a sense.

[B. Govindarajan, executive]

First-time buyers, maybe about 13%, 12%, 13% roughly in the portfolio level may be slightly higher, maybe about 19 to 25 percentage level first-time bias. But there are companies who are actually looking at upgrading because they want to own a Royal Enfield, which is a cool brand to hang out with. And that way, it is really helping us to get the younger customers to our fold.

[Operator]

Next, we have question from Ruchit

[Ruchit Mehta, analyst]

Sorry, just going back to the recent kind of volume trends. I kind of hear you that maybe there is some compression in the marketplace about different options that the customers have and if the volumes are low. But if I were to kind of think about like what was happening in a similar time last year when there were actually launches happening, a lot of mines around 2 new competitors coming in and that we launched even then our volumes were not kind of flat like what we have seen now. So I'm not able to fully appreciate the rationale that you are getting on these low volumes. If you can explain it. And maybe the other reasons the company are talking about all peers like elections and heat wave and whatnot, the other reasons for the slower cost that you are seeing?

[B. Govindarajan, executive]

Rushit, I just have to give it in a slightly elaborate way. In the middle weight, if in case, it's normally we say what? Middleweight is at a particular price point, people have inflation to upgrade inclination to buy because the price point is something there. If you actually look at who has gained, I don't think anyone has gained. So where are the customers? So because we have 7.5 million unique customers who actually come under with a Royal Enfield website every month. So when we start looking at the leads and then trying to figure out even in all the markets we started looking at where exactly the consumer, why is it not getting converted? And we go back and then start checking, everybody starting saying, "Yes, I consider it. But now I think I'm clear. I want to come back to the Royal Enfield. So that's the confusion which I was talking about. Everybody was actually given a lot many options directly against oil and field and all those things, that has I would say it's a deterrent in decision-making, and that is where we felt is a major issue there. It is subsiding, and that's how we are seeing walking in is going up.



Even though, I mean, I must tell you a heat wave and the elections has had its own impact. I'm not saying no to that. Our working was lower during that particular point of time. But the conversion rate has gone up. That's why retail has been good. We have grown retail in a single digit. Primarily the conversion has been very good.



So as I mentioned, it's the confusion in the consumer's mind. In the consumer's mind when the clarity is there for decision-making, especially for middleweight categories, it actually helps. As that is settling down, it will help us to come back because or has climbed very higher volume. No one could be able to actually garner volume and our retail has been very good.

[Operator]

Due to time constraint, this was the last question. So over to Vidhya Srinivasan for the last closing comments.

[Vidhya Srinivasan, executive]

Vinod, anything from you?

[Vinod Aggarwal, executive]

No, I think thank you very much, [indiscernible].

[Vidhya Srinivasan, executive]

Thank you very much for taking time and attending our question-and-answer sessions also for this Quarter 1. All the best. I look forward to see you soon at the motor of us. Thank you.

[B. Govindarajan, executive]

Thank you.

[Vinod Aggarwal, executive]

Thanks

[Operator]

We can close the call.