Eicher Motors Ltd

NSE:EICHERMOT

Earnings Call Transcript 2023-Q2

[Unknown Attendee]

Good evening, ladies and gentlemen. I would welcome to Eicher Motors results call. I would now like to hand over the call to my colleague, [ Basudeb ], to make the introduction of the management. [ Basudeb ] over to you.

[Unknown Attendee]

Thanks, [ Avi ]. Thanks to Eicher Motor management for giving us the opportunity to host the conference call. We have with us Mr. B. Govindarajan, CEO, Royal Enfield; and Mr. V.K. Aggarwal, CEO of VECV, representing the management. Today, Mr. Govindarajan, who will take us through share in field related discussion. Over to you, sir, for your additional comments.

[B. Govindarajan, executive]

Thank you, [ Basudeb ]. Hi, everyone, and welcome to Eicher Motors Limited Call for the Second Quarter Financial Year I hope all of you are doing very well. I'm glad I've had the chance to meet some of you in the investor call very recently, which we had at Chennai. With regard to the performance of this quarter, I'm very happy to announce that we have had a portion as we have reported our highest ever revenue from operations and highest profit after tax. We are continuing to achieve our milestones both at Royal Enfield and at commercial vehicles. At Royal Enfield we started this quarter with the spectacular launch of the all-new 135 on our well-refined J-Series engine platform. We did it at an got with all the global media. It has a huge reception. And very, very recently, 2 days back, we also launched our Super media 650 on the winning platform at Iain Italy. I'll talk you to about this in details for the period of time.

The fiscal season in India has brought in a very strong sales for oil and field. We are very strong and have recorded more than a 50% market share in H1 for more than 125cc. In line with our broader vision for sustainability, we announced an unique and interesting partnership with Genesco in August, where we will collaborate with them to promote and save or the intangible cultural assets of India, starting only at males first. Our ambition is to partner with this 100 ml communities to adopt sustainable living practices by 2030. We are very proud of this partnership in the overall at Eicher Commercial Vehicles, we continue to focus on strengthening our market share in the heavy-duty trucks and buses segment. Mr. Vinod will talk us through about that at a later point of time.

Overall, at the Eicher Motors level, we continue to maintain a razor-sharp focus on our future strategic growth plans, along with the robust ESG vision. I'd be elated to share that we have improved our position in the DoJ Sustainability Index. Secondly, can equity, we are now having the top in the emerging markets category. To conclude, at a Asia motors level, we are very confident that we are on an accelerated growth path. Moving on to the financials. Our revenue is about INR 3,519 crores for Q2, which is our highest ever quarterly mark, up by about 56.4% from INR 2,250 crores last year. Our EBITDA is about INR 222 crores, up by 75% year-on-year, again to about INR 470 crores last year.

This one is marginally below our highest ever mark reported in Q1 of this financial year. PAT stood at about INR 657 crores, which is the highest ever EML, up by about 76% on Y-o-Y basis as against about INR 373 crores reported last year. Now I'll talk you through something about what has happened as a highlight in the Royal Enfield. Royal Enfield has an exceptional quarter in Q2, and we have accelerated our growth momentum. That's what we briefed you when we were there in the investor meet also. The first of that particular product, which has tripled to our growth is the 350 launch.

The consumer response and from the media has been [ strandingly ] well. And everyone now start looking at the inquiries are going up, bookings are going up. That's a very good sign. We wanted that -- this has to give an additional volume to us overall, and it is exactly landed in the positioning which we wanted for the product, which gives us an additional volume for those consumers who are looking for a Royal Enfield motorcycles in a different format and Antara it back on after that areas. We have rolled out on the Hunter have more than more 50,000, 55,000 motor meters already from since the launch, which we did in August.

Our order books are very good. It is very healthy. It's growing. Hunter, we want it should get new consumers from a new geography, and that's what is the initial thought, and it should not cannibalize something in our product, and we are seeing that positive that it is not cannibalizing and it is getting a new consumer sustained buyers, the guys who have really joined the motorcycles who are looking for a Royal Enfield app motorcycle has got addressed to this answer. We are just 400 only in India until now. In the month of November, we are opening in APAC. Subsequently, it will be to EMEA and to remand all other areas in the market. It's the hunters also ramping up around. So to that extent, we will start opening up the market. But as I mentioned, it is a J-Series, which is the overall -- it's a company. It is a global product.

That series refers landed. So anyway it can go. We don't need to wait for some more commutations and all those things also we are done and tested and it's ready so that the vehicle can be exported as of now. On #8, for 2 days back, we unveiled all new Super Media 650 at Iman Italy. We have seen very exciting initial feedback from the media and from the community who has been seeing business is called the still everybody is now looking at and asking a lot of details on this. The SuperMedia cis an authentic retro through rider on a successful 6P platform. And we have a lot of learning and legacy we’ve been making. 1915, we were making use and then exporting. The media has actually taught us a lot more in doing what is that it has to be, what the consumer wants. Super media team, which has been there in the thinking and making for the past 3 years when we launched and exactly the media came back and I said, that's the very accessible, simple, easy to hand the Royal Enfield looking [ Petrotite ] the cruiser.

So we're looking forward to a great such even in that particular product. For the quarter, we sold about 3,451 motorcycles, which marked about 65% growth from 12,515 last year, sequentially, 9% growth over the previous quarter. Domestic volume, we slowed almost about 13,067 units during the quarter in India, reporting an increase of 73% -- and a growth of about 16% sequentially. The festive retail feedback from the field has been very strong, and we recorded our third largest pustule retail during the September October window.

Our international market, we continue to progress on the ambition of becoming a global motorcycle brand from India. On a Y-o-Y increase of more than about 14% at 2,384 units against 7,900 units in the previous year. International retail performance for H1 has been very robust. We have got this solid growth of almost about 40% to 55% across various regions. RA is now the leading midway brand in the U.K. and Avon the top 3 in Europe. That's -- we are a proud moment for all of us and we were reaching the market share position. Our market share has climbed up to 7% in Americas as of now and 9% in APAC and about almost 10% touching in EMEA region, backed by robust pipeline of new products, which we are launching. This all is without a hunter, which was there because Hunter will open up the entry level even in an international market.

As far as the retail network expansion is concerned, we have been steadily moving ahead in our domestic network expansion. We have a network of almost 2,130 retail outlets, 108tailership outlet format and at 1,047 studio format. An international market, we continued expansion with an addition of another 6 stores exclusive stores in Philippine, Mongolia, Vietnam and Thailand because we are slowly opening up one by one all the markets. As we have been seeing as a brand, we always wanted to be a full brand to go there, open one showroom, make the product experience and people start failing the product, and that's how the experience we'll start building the brand, then we will go in for an expansion. And that's the phase we are entering. So the expansion phase, which is taking place.

As of now, totally, we have almost 710 multibrand outlets and about 175 exclusive stores offset. And that expansion plan is continuing with the new products which are coming up, the expansion also will go on in that sequence. As far as the motorcycle and ride events, we did the 11th addition of one ride where Royal enthusiasts across the world gathered to rise that one right on a particular date. And we also kicked acted the Royal Enfield Continental GT cap we did last year and this year also it's been getting received very well by the young guys. There's a lot of traction, which we are seeing that for this sort of raising as is not a true racing motorcycles, but it is a fun type of retro racing, it's a sports and that's actually getting a traction in the GT cutthroat growth.

Before I conclude, I would like to share another achievement from Royal Infields in the data satisfaction survey, which was conducted by pad. We have driven emerge as a second runner, which compared to last year, it was a fierce change, which is there. So the dealers also started looking at the growth is coming back and things are better, our connect is becoming better. And overall, this quarter has been an outstanding one and a hedge level. It's been a record growth for Asia motors and a Royal Enfield also. Now I'll hand it over to Mr. Vinod to walk us through the VECV financials an update. Over to you Vinod.

[Vinod Aggarwal, executive]

Thank you, Govin, and good evening to all of you. Let me first start with the -- giving you an update on the virtual vehicle industry. If you look at the CV industry, as you all know, after 3 years of recession, the CV industry is on the growth path, and it's continuing to grow every month. And the first 6 months have been very good for the industry, where the industry 3.5 tonne up it has grown by 68%. And even in the month of October, the growth has been 15%. So based on this growth, of course, it is expected that this year, we will make good progress for the overall industry. Even though we may not still touch the earlier peak of 2018/'19. But in some of the segments, it might be new peak, like for example, in 5 to 15 ton trucks, it is likely to be new peak even though in heavy duty and in buses, still it will be away from the earlier feet. But of course, the -- we have also seen in the past that whenever the recovery happens after the recession, it always leads to a new peak in 2 to 3 years.

So therefore, this time also, I am of a very firm belief that we are likely to see a new bag in the coming 2, 3 years. Of course, there are headwinds, which are there, which are coming from inflation and global situation as well as interest rates. But at the same time, I think the outlook for the Indian economy for the current year, as you all know, it is 7%. And future also relatively much better than the global markets. because of our own situation in the Indian markets because of our dependence on the domestic consumption, even though there may be impact on exports. And we also experienced a similar impact in our export markets like the truck export markets. We are having advanced because of the global situation, especially the foreign exchange situation of some of the South Asian markets like Bangladesh, Nepal, Sri Lanka.

And as a result of that, the markets there are down because there are a lot of import restrictions in those countries. Nevertheless, as I mentioned, the growth for the industry is good. And even in the month of October also, we have seen the industry growth of 15% as compared to October of last year. And as you all know, last year, second half itself by the much, much better year and with a good base. And with the higher base also, we have seen the growth of 50% in the month of October. Now in line with the industry growth, we continue to also grow in BCV. And specifically, I think the highlight has been our good growth in the heavy-duty truck segment where our market share in the first 6 months, both Eicher and Volvo put together, Eicher and Volvo trucks. It's now 8% plus. We are at around 8.2%. And for share brand itself, between around 7%. As you all know, this has been our -- one of the biggest objectives that we should grow in the heavy-duty truck market. So the heavy-duty truck market is very large.

And if we start growing in that, then of course, the potential for BCV in heavy-duty trucks. -- is going to be much, much stronger in the coming years. And then we are also growing very well in buses. -- basis, our market share in the 6 months. We now reached between 24% to 25%. So that is, again, a very good growth as compared to the previous years. In the light and medium duty truck segment, we continue to maintain our strong position of 28% to 30% market share. And our strategy is to sustain that strong position while slowly and steadily growing in the heavy-duty trucks as well as the buses. Now coming to our financials. Our revenue for the quarter 2 this year, including the other income, it is INR 4,215 crores as against INR 352 crores last year. So at a 34% growth in the total income. And first 6 months, it is INR 8,148 crores as against INR 4,792 crores in last year for 6 months with a growth of 70% in the top line in the first 6 months.

As far as EBITDA is concerned, this quarter, quarter 2, our EBITDA is INR 249 crores, which is 6% at net sales and as against INR 170 crores, which is 5.6% of net sales the previous year, quarter 2. And the first half year, our EBITDA is INR 467 crores at 5.9% to net sales as against INR 188 crores at 4.1% as on the net sales for the first half of last year. Our profit after tax this quarter has been INR 81 crores at 2% as against INR 17 crores, 17% at 0.6% last year quarter 2 and first half our Pati 1.8% as against loss in the first half of last year at 1.3%. So therefore, in spite of very strong competitive pressure. As you can see, we have continued to show good performance in financials and with a good potential to grow. And relatively, we are doing better as compared to the competition as far as the margins are concerned.

And then, of course, we have also -- last quarter, the another highlight has been introduction of our electric buses. We have just executed 40% electric versus order for [ Tendigar City ], which are running very, very successfully there. We also launched new models in the both in the hollow and Asia Spain, Sleek, which are against state-of-the-art buses, and we also introduced drive trucks for the export markets and also new bus models in the export markets in the Middle East. And another good recognition for BCB has been the second year in a row. We were ready as #1 in dealer satisfaction in the survey conducted by federation of automotive delegation -- and we continue to be #1 this year as well as we were #1 last year as well in this survey, which puts us in a good advantageous position to create good customer satisfaction. So all in all, I think we are in a good position, and we are doing very well as far as the volumes are concerned, and we should grow with the market. And of course, the financials also should grow in line with that. So with that, now I think I hand over back to Govindarajan for any last remarks.

[B. Govindarajan, executive]

Thank you, Vinod. Just one point, I'm just in Mr. [indiscernible] at inquiries slightly enter with it. He's not able to attend this. So that's mean we know that actually having it and at modest reading it on the alone. Thanks for joining. I think it's been a good quarter and Eden for BCB and Royal Enfield overall for Eicher Motor Limited. Thanks for joining this call. I think we can move to the question and answers. Back to you.

[Unknown Attendee]

[Operator Instructions] We can start the first question from Gunjan Prithyani.

[Gunjan Prithyani, analyst]

Sir, in your introduction comments, you mentioned that the Hunter has seen a different set of customers. Could you share a little bit of color on how the addressable market has changed either in terms of the age profile or the geography? A little bit more color around that? And what sort of order backlog periods are going on there? And is there a thought process to ramp up the capacity on the Honda platform? That will be the first question.

[B. Govindarajan, executive]

Sealant is concerned, the first time buyer, which used to be normally about 15% that range, it has jumped to almost about 18.1% to 18.2% in this year post-telaunch. In terms of first-time buyers, if I have to talk about the existing Royal consumers to 106%. -- first-time buyers, is going up and upgrades are also coming up in business. What is Hunter doing and what is the confidence which we are having. I think during the launch also we were explaining -- this is a product for those consumers who love the brand Royal field, and he wanted to associate with the brand royalties. But if he wanted a motorcycle, which is a bit more accessible, slightly lower in weight compared to the motorcycles, which we are having in us like Class A, hole. And it has all the rider handling the ability for a tight situation in a traffic level. And that's where we were looking at, and it should get new consumers and not cannibalizing with the existing thing. Happy to share with all of you the cannibalization is full most middle.

Marginally, will it be there because of the price point, some people can take a decision here and there, but it hasn't been any materially different in terms of the cannibalization. In terms of age group, the hunter in this new format, it is the 80 to 25 wage go, it's almost touching 40% in Hunter and about 26 to 30 is more on 33%. So it is more and more the anger audience who are coming into that. So what we wanted over the hunter is exactly got positioned in that particular form. It's adding volume, and it is adding the new consumer tainted field. And that's where we were looking for, which is under the ant us.

[Gunjan Prithyani, analyst]

Anything on the geography or also wait period, order backlog, production thought process, if you can share on that?

[B. Govindarajan, executive]

Yes, Hunter, it's a product now it is available Sandia. And in terms of numbers, we have rolled the 50,000 motorcycle we produced -- so to that extent, you can see that is continuously in this in a waiting period. It will be waiting period as of now. Not because of anything else, we anticipated both reroute and Metrocenter that's what we launched. Retreat. -- and the Metro interactor. 1.69%. And at that price point, when we launched, we were assuming that the root, which is 1.49 lakh also, people will look at it.

It's good for us as a company and the consumer was enjoying. Now the referral, the percentage is very low. So the metro is the highest. It's actually in an upgrade, which is actually happening which is a very good thing that's what we were wanting to do that has taken. So what has happened is the extremely part of Metro at an assumed level, we wanted to increase it further. The higher percentage of metro can be given to the consumer. We started that looking at the initial responses, we kicked that activity. From November onwards, the existing numbers and pay also is slightly going up. But it is very good in terms of booking, and it is constantly increasing the numbers for that.

[Gunjan Prithyani, analyst]

Okay. The second question from me is on the export side. Now everybody has been calling out a lot of volatility in export markets given where the macro is -- I mean, is there any slowdown that you all have seen? And how should we think about the exports scale up over the next 12, 18 months? So do we see that any headwinds on that part of the business?

[B. Govindarajan, executive]

Exports as first royalties I will just tell you because even in the Q2, the retail has been very good for us. We have been gaining market share. In fact, some countries where inflation is very high to be honest, as an energy cost is so high in Europe and. Even in those markets we gain the market share and we have almost booked 10% market share in the middle was in those countries. America, both in North America and Latin America, our retail has been outstandingly grow. Will there be a bid pressure point that nobody can escape from the kind of an inflation and all those things.

But what is promising to see, that's what we are at [ Imaan ] we are meeting all the European people who are here, and we are launching our [ Popat ] that point of game we were discussing. The mobility, the demand has not gone off. So to that extent, everybody is looking at what are the new products which are coming up and when we will actually be bringing out to the motorcycles. And we somehow feel our motorcycling which is accepted very well and continue maybe 1 month because of the total non-ready region will be , but we are building up for the season coming years. So to that extent, we will start continuing the production because that's what our entire dealer network is also make for a...

[Unknown Attendee]

Next, we have a question from Pramod Kumar.

[Pramod Kumar, analyst]

Congratulations on SuperMicro. -- looks pretty good. My first question is on the kind of -- the discussion we had during the Investor Day as well that incrementally, you would like to focus on the absolute growth and the ROE rather than kind of focus too much on the percentage margins on the EBITDA front. So -- and this quarter, we have seen a bit of a step down on the margin and also on the ASP because of Hunter, right? So how should the investor communities look at the margin profile of the organization going as you see Hunter ramping up going forward and then leading -- getting into international markets as well because on the domestic front itself, Hunter is doing very, very well, and I'm pretty sure international markets also will be a big success for Hunter. So how should we look at this in the context of ASP and EBITDA per we compared to the portfolio that we had so far, which was much, much more premium. So if you can just help us understand that will be great.

[Vinod Aggarwal, executive]

Yes, Pramod. So Hunter, as a product when we wanted to launch it, it has an addressable market at a risk man, which is also very accessible as a set. That's why we say it. That's why we said we are a growth focus now. There has to be a rebalance, and that's the strategy which we looked at. That should be a rebalance between the profit and the profitability. -- design when we launched enter. There were some headwinds also when we were launching that point or point of time, which is not baked in. One is the commodity at a point when we were launching in the current level, there's a lot of softening, which is taking place.

When we launch a new product, I always say that for 3 months, let's have a pipeline of VAV activities, which are required, but we won't because it has to reach the consumer and the value proposition, which we wanted to give it to the consumer, the first 3 months, we have to actually look at whether it has landed to them very well. So for us, the opportunity for the profit pool on an overall number, Aimia, which also we'll start working on is through the commodity softening, which is helping us as a tailwind. And as I mentioned, there is value engineering activity, which we will be doing it. And our CapEx is not going to be very high because, as I mentioned, it will be reentry.

For example, in the metro to retro, ideally in the platform, the number of complementaries, which we have changed in all with there's just about INR 1.2 crore additional investment year out there to debottleneck, we can actually move the whole product to a 100% metro, even if that is what the market requires. And that's the good sign, and we assume that our profitability also with the retro and the metro at a particular percentage combination. Now the metro more and more, it's also a good sign. And because there is a demand which is there, we also increased the price, you would have known in the month of November. -- on INR 3,000, which we have done in Hunter. So the pricing option is there, commodities won't help in a way, which is there. So what we are looking at is the growth, and that should be a growth for us, and that's what the center is bringing in. And let's keep going there. In that side, we will start looking at profitability also paneled what does that we have to work on.

[Pramod Kumar, analyst]

And Govin, would you kind of guide from the current quarter, would you expect the percentage numbers and the EBITDA per vehicle to kind of improve as the benefits of commodity kind of come in and the price increases also kind of help you because -- and what would be the sustainable profitability what you would be quite happy with in terms of...

[B. Govindarajan, executive]

Same as an organization, we don't guide forward guidance. We don't give it -- and I can only tell you, as an organization, we wanted our growth focus has to come in our growth focus, we wanted to bring any particular product, and that's enhanced it answered our requirement. It actually started giving us a higher volume and not connecting the existing one. Number one, that as good in a way. Second is, we -- there is no commodity pressures now. We are all assuming the super commodity pressure as this will continue for a longer period of time. That is not there. In between, we had our semiconductors and all those things, we were actually buying it from the reseller caprice was higher. The logistics cost was higher. All those things are behind us now by and large.

So there are and the value engineering, which is possible, which I'm just now kicking in organization to say that let's start looking on one by one these things. And so -- but new product launches will come to. Now this is going to media 650, which is going to come in. Initially, I thought that probably we'll give it only in the first quarter. Now it is coming up slightly higher. So mix, I see there is a positive trend of this organization as overall.

[Pramod Kumar, analyst]

No, that's great to hear. And could follow up on the -- more of the industry terms as well on the RD norms, what would be because we are hearing that on the 4-wheeler side, the cost implications will be big. How do you see that in terms of a cost for the tool industry for a category like 350CC,what ideally is the cost inflation, what you will see on account of RD norms them, sorry, apologies, ODPi, sorry. Mobile, it has 2 phases promote.

[B. Govindarajan, executive]

OBD2 ODI. 2A is only intent be, when it comes up, that is what is a cat deterioration monitoring, which has to come in at close. And the 2 big wins it comes up, that is then probably there may be a bit of loading in depreciated metals, possibly which can happen. So every one of his stated [ aliciworking ] on. If that comes, how do we actually protect it. So for example, when we were doing a BSA, after implementation of BSIs, we started looking at optimization. Now there is a time which is there for OBIB, very recently, in fact, it is the final notification. So it will reach us maybe in a day or so. Now there's the president, so it has come through -- so once that comes in, I think we have time for to be it's only 2025. So all our optimization activity, which we may have to do, that can be done. That's the time under which we asked for from the government and government has given. And hopefully, that should not put burden on the consumers also because of this.

[Pramod Kumar, analyst]

And can I take one question with Vinod, sir?

[Vinod Aggarwal, executive]

Yes...

[Pramod Kumar, analyst]

Yes... Sir, on the CV demand, we have seen somewhat of a moderation at the start of third quarter. And we've got some feedback from fleet owners that they probably may be in a wait and watch mode at least in February before they kind of get a color on the macro situation and the interest rate scenario. So given that, what are you picking up from the market in terms of the demand in the near term on the commercial vehicle side and whether this global uncertainty and higher interest rates has resulted in somewhat of a pause or rethink on large fleet owners?

[Vinod Aggarwal, executive]

I think we have to look at the overall scenario because we won't be able to answer based on the month-on-month because of month-wise figures. If you look at the overall scenario of Indian economy, I think everyone is having consensus that we are going to have 7% growth in the currency -- and sentiments for India, they are relatively much better as compared to the global situation. If you look at our GDP tax collections month after month, they are quite handsome, in fact, INR 140,000 crores plus if there are any concerns, they are largely on the trade balance concerns.

There again, I think there are a lot of things that the government is doing on the ethanol mix in already has happened and 20% talking of. So therefore, I think [ Amet ] is trying to address all these concerns with respect to these global situation of the increasing crude oil prices. At the same time, when the economy grows, there is environment for more and more truck trucks to move the goods and fines. And as you know, these periods have been bad years for the industry, and it was a drop bottom in 2021. Therefore, since it is cyclical industry and economy can't do without trucks. And you also need more modern trucks to take care of the demands of more tax heavy customers or customers who focus a lot on the productivity as well as timeliness and the costs.

Like I should talk to any customer today, they always dictate that I need delivery in one so period, and I need this cost. Now if they have to meet these requirements, you can't meet those requirements with the old trucks. Therefore, it is imminent that old fleet of trucks have to be replaced. And since replacements have not happened in past 2 to 3 years, these replacements are going to happen, not only because of the pent-up replacement requirement, but also because of the need of more and more productivity and cost reductions, which can be delivered only by the new technology trucks. Therefore, I would say that overall, we are going to see good trends in the sinus in the coming maybe 2 to 3 years because we are in the recovery cycle. And still, we are far away from the earlier peak as well as heavy-duty trucks and the buses are concerned. Like and medium duty still this year itself, we may continue -- so therefore, my own feeling that we are going to see a good time for the industry.

There may be different indications in some months or the other, but that doesn't mean anything. Even in the month of October, the industry has grown by 15% over a much better base of October last year because last year, October itself, the industry has started growing. And last year's second half, the growth had started. And even on that base, we have seen a growth of 15%.

[Pramod Kumar, analyst]

So the pricing continues to get better, sir?

[Vinod Aggarwal, executive]

Pricing will get better as the industry grows price. -- as of now, it is still not better, but you have seen a lot of statements, which are coming from competition. We are also concerned about profits. How long they will continue to show losses.

[Unknown Attendee]

[Operator Instructions] And next, we have [ Pramod Amthe ].

[Unknown Analyst]

Hi, thanks for this opportunity. Since we touched up on OBD2 I wanted to check one of your products still runs the entry-level production runs on the holding in platform. What are the plans to comply the same all of your products can engine?

[B. Govindarajan, executive]

Yes. So all our products as of now for bid 2 years we are ready. And to be we are working, as I was just explaining for the 2, we have to be capital that it is not adding cost to the consumer and to us also. To that extent, we started working on and we have time for it. But time to come, the transition to 2 years, we don't anticipate any problem. We'll be comfortably transitioning into that.

[Unknown Analyst]

And second follow-up question is, if I had to look at your ASP rise. First quarter was bit impressive -- and once you launched a new product, it seems to have seen a sharp oil job and as a result of which first half, there is literally a flattish KSP. And if I hear you right, you're already seeing a better product mix within the hunters. If it goes down, do you see a further pressure on your ASP in the second half and hence, you might have to take more pricing action to drive our top line and margin expansion?

[B. Govindarajan, executive]

So in the ASP comes once again, first is this growth focus. That is what we actually said it's a rebalance. It has to be a growth focus. We should get more consumers into this. We look at it the business of holistic. One of the words in motorcycle alone and ASP. We can actually look at the accessories, the GMA, which all get added on to that when the Hunter was launched, in fact, our GMA penetration isn't slightly lower because we also have not brought it in time we've missed out. So that is also going to come into this. Commodity is the way we priced it at that point of time, the commodity has not shown anything substantially and that we are expecting that it will come down.

The third, which I mentioned is as it is a new product, the value engineering projects has not kicked in. So it is all in the pipeline. We were envisaging, we were looking at. We have the all host of activities, which have to be looked at for the cost angle and all those things. But it will actually start certifying now on. Another one lever, which is there for that is the international market. International market, as of now, the product hasn't come in at hunters because we're just opening into a country by country. So overall, as we wanted it as a growth, that's what it was meant for and it has given. Now when we look at ASP profitability, how do we work on it. And obviously, the avenues and levers will be pulled whenever it is required, and we'll be continuing on that part.

[Unknown Attendee]

Next, we have a question from Raghunandhan.

[Raghunandhan N. L., analyst]

Congratulations on the unveiling of Super Meyer. Sir, I wanted to understand that there are expectations of multiple launches ahead at the 650 CC space. How would you look at the opportunity? Would export be a bigger opportunity? Or would you see these models as credible upgrades for domestic market? Which one would be the bigger area you would focus on?

[B. Govindarajan, executive]

Look, first of all, the cruise, the entire process in India, we had likely city by Thunderbird, underbed that we came out with Media. We understand long distance side, we understand going. So we came out with the 350 media cruise business, which is a simple closing one. The 650 platform has come over the time when we were ready, and we were also talking to our rating community. Everyone started looking at, we should also come out with one more cut on the Twin platform. When we were contemplating and consuming the win platform at that point of time itself, we said the platform has to come with a caters and Roadster and the cruiser. So we came continue with GT and with [indiscernible]. Globally, there has been a resounding success, and it actually created that category and groom the category in that particular segment.

Now we see this is an another one product which everybody has been looking for, not a very heavy to say, a guy who doesn't like whose can also get onto the motorcycle will enjoy cruising and it should be so accessible and consul, not a complicated cruise as is a feed-forward cruise there, but you won't feel it is a very heavy mission. So in the cruise space, we feel there is a good space which we are entering. That's what our riders are looking at across the globe, and it is helping us in the right time, which you are bringing in whenever just unveiling it to today's black and all the media when we were talking all the European customers over a year now and we are generally adding, it's coming out to be very clearly that that's the product exactly you are looking for and you brought it in the fit, finish and in all those things.

And we will come with a very good price point also in an accessible way. So that's across the globe, that will also show the growth potential. But more products which are in pipeline for us to bring in for India others. As far as India is concerned -- today, I think with the long growth which are coming up, and the ready culture, which is gaining momentum.

And post-pandemic, once again, people allow say, we can rent sustain. Consumers can or looking at. I can tell you now people started actually asking me when is that when are you opening the booking on the super media. So that's the demand which is coming up. So hopefully, I will be seeing that both in India and I would say that both ways, it will be addressing the EC cruising but even the non-cruisers, ideas for that.

[Raghunandhan N. L., analyst]

Sir, my second question was on the commodity impact in second quarter because gross margin Q-o-Q cost impacted both by mix as well as the commodity and also commodity deflation impact do you expect from Q3... Simple way go?

[B. Govindarajan, executive]

Yes. In Q2, it hasn't impacted into the P&L to that extent. So it will start going in Q3 onwards.

[Raghunandhan N. L., analyst]

Thank you, sir. But would you be able to give some numbers or how much benefit you expect about...

[B. Govindarajan, executive]

Very certainly in the next year yes.

[Unknown Attendee]

Next, we have a question from Gunjan.

[Gunjan Prithyani, analyst]

So my first question pertains to the domestic market. So excluding Hunter, can you give some color on how that our core portfolio is doing? If I look at the numbers on the wholesale basis, clearly, we have to see material pickup in demand or a pickup in volumes on that side from a normalized holding perspective. So any color on that?

[B. Govindarajan, executive]

If the question is the word is Hunter is coming and all the other models are not growing. I can tell you this is a season anyway. All our models also has grown. It is also a good sign. So on the booking trend, Glass A, bullet, media, everything has actually gone up. What we are doing now is within Hunter launch, every count we are watching, is it giving an additional number or it cannibalizing? That's what I mentioned, it is not cannibalizing at this stage. That's a good sign for us. And the consumers, even in the rural side, they're also looking at the metro. So that is also increasing. In the process, other models are also coming.

Having said, we are ramping up our digital presence in all the products even for classic. We did once again classics in the market with the digital media, and we started doing a lot of track dates for our Hemali and CRM. We are doing a college connect for all our gram on -- we actually started the flat track and we can do track rating. All those areas, it is actually helping at a product level also. The GT cup, whenever the JT costing comes up and there is a bus in social media, in fact, a continent GG's requirement and inquiry is going up. So we are with the a lot of news on the super media, a lot more guys are actually started employing about media. So the inquiry for VTR also has gone up. So if a combined effect as an organization when you come out with a new product in an adjacent field and convey that to the consumer authentically, this is what we wanted to come and give it to you.

The rest of the products are also growing at this stage. But I have to give you one thing with the rider is this is the puts everything else on. So we'll have to wait and watch. But I somehow have a feel that all our products because we also have refreshed plans. So the refreshes also will start kicking in. So to that extent, we see there will be a growth in every product which we have.

[Gunjan Prithyani, analyst]

Okay. And secondly, on Hunter, any sense on what proportion of demand comes from, say, beyond top 10 cities or top 20 cities, primarily, is it more broad-based in terms of demand in terms of regional lens through this business?

[B. Govindarajan, executive]

In terms of -- see, we don't do it in that form. We normally look at it categories in terms of more than 10 cc motorcycle per man in that particular region, EAAs types. If I have to tell you, the booking, which is actually coming out of citywide and all those things, it's across until it's actually having a response. Having said, and I have to tell you, in the initial field, which we wanted to give for the test rates and all those things, we have covered only about 70% remaining 30% to introduce stores on the very filling up. So we are slowly doing more for opening, which we will be bringing in more consumers. So it's a pan-India and it is not that any one particular area, which is there. But the growth which we are seeing in all the top 10 cities, which we have been watching everywhere, there is a growth on that.

[Gunjan Prithyani, analyst]

Got it. And sorry, one last question on CVs to BG. So the prospective demand from small and single fleet owners, are we seeing them coming back, coming that has been one segment which has yet to show any material recovery. So what are the trends you have seen there?

[B. Govindarajan, executive]

If you look at the trends in the light and medium duty trucks are in the sub 5 contracts, I think the maximum growth is there in those segments. And those are the segments which have the either single truck owners or very small plays. Therefore, yes, of course, for the small operators, the interest rate only and the sentiments in the matter more. But at the same time, I think there is demand for movement of goods that has to be met. So I think it's coming because of the economic requirements.

[Unknown Attendee]

Next question from Kapil Singh.

[Kapil Singh, analyst]

Govin, sir, first, the question is to you. When we look at your production, we've in the past been facing supply shortages. So when I look at the current volumes, are you able to supply as per market demand or you're still facing shortages and therefore, you need to build out production from where you are currently?

[B. Govindarajan, executive]

As of now, I'm sure we also discussed at some other time. We are more doing about INR 3,100 crores, INR 3,200 numbers. The production numbers, the capacity is more than same number one, because we have already built CapEx, so that's not the constraint now. Again, we had an issue of the semiconductors, availability of steel itself all those issues. That's not in the headwind as at now. It's by and large, getting sorted out. I'm not saying it is completely gone or something like that. But that's not the top of the mind issues now. But all the semiconductors are the electronic components. We also started off doing inventorization, substitutions, all those activities which are required, which is also fixated. So production is not a constraint. It's a model mix exact model mix, which we have to align and we'll give it to the consumers, and that's what it is. It's not a concern any model.

[Kapil Singh, analyst]

Okay. Great to hear that. Vinod, sir, one question to you, please. BS VI Phase 2 is coming up. And if you could help us understand what is the kind of cost increases we will -- we should expect for LCV and MSCD portfolio? And what are the elements that are going to get added for that...

[Vinod Aggarwal, executive]

BS Step2 is going to come from 123. And basically, there are much, much more stringent compliance requirements. But it means that the midstructure are responsible for ensuring that the tail emissions, they continue to meet the standards on the road for a long period of time after the vehicles are sold. So therefore, the regulators, they can pick up any truck from the road and they can see that whether it is complying or not. So I think that is the major change that the emission standards have to perform absolutely in line with the law. And if they don't perform, then there can be major implications for the man factors. So therefore, I think all the companies have to be very, very -- there are some additional requirements, which are there. But at the same time, as far as the costs are concerned, there will be some increase in costs. But at the same time, we are also working on various other cost reduction revenues. So hopefully, let's see our plans when we are closer to the date of implementation, we will take a call that how much price increase is [indiscernible] because of that.

[Kapil Singh, analyst]

Sir, basically, just wanted to understand, I know you will not have an exact estimate right now. But directionally, when BS IV to BS VI happened, there was a big concern regarding this. There was an element of prebuy also that was expected. So is it going to be that large? And will there be some segmental disruptions in, for example, LCVs could see much higher cost increases or something.

[Vinod Aggarwal, executive]

It will not be that is.

[Unknown Attendee]

Next, we have a question from [ Jan Cucharale ].

[Unknown Analyst]

Sir, my first question is on the product portfolio. So in the recent analyst meet, we had highlighted a lot of products, right? But what I wanted to understand is the product portfolio expansion in terms of new categories, right? So for example, a is a new category of products that bring a new set of customers to us, right? The main has a different set of products that got a different set of customers go. So in terms of product portfolio that you're looking to launch. So which are the products that will expand this category of customers and not just product that as expansion of existing minutia talk about that..

[Vinod Aggarwal, executive]

So Andres, product portfolio per se, if you look at Sugar, we were only one platform company. Now we have 2 platforms because UC was the only platform which we had. Now we have J-Series and the -- we are also working on and upgradation cycles for all these platforms because it's just -- we have just launched and that we have done that transition on this. In the product portfolio, we always look at what is it -- there are some products like Gasmedi all those. They're all innovation, but it is a replacement of an existing product. Adjacencies like we did in male for an adventure , since we found Camis one more variant which we can bring in. Let's see what is an experience the consumer is looking at. Globally, in these sort of categorization, want I have to understand it only the experience.

So now we had Meta with an experience we said, okay, in the platform of win, we can come out with accessible cruise of a retro style from Royal -- that's what we are doing. Similarly, we did a cafe rated in 60 ccs, in a sports category, is there something else which we can do. At what point of time it is required, we will definitely come out with that. The roadster category in that, what is that the product adjacencies, which is required. And those are all the thought process for this product line am, which we continue to evolve, and we have signed up -- that's why we always had a healthy pipeline of new products on a platform-based and category base have to be signed up and then the organization have to start working on, and our CapEx are also dedicated only for that.

So to that extent, our pipeline is very healthy. We have a lot of products which we have been working on. And now in this year, you would have seen we came out with the tran, we came out of Class 8. Now we have with the P4 which we are coming up. So like that, all these products will start coming up at an interval, which is the market is ready, and we will time that and then we'll do the launch an -- you will see a lot of new products which will keep coming from our LPs.

[Unknown Analyst]

Yes, I get that. What I was asking is, will there be orders that could be category expanded, right? So obviously, we have now launched Mator650, which is an extension of existing meter product, but something like a anti was a new segment all to get done. So do we have those kind of products which would be a new segment that will bring a new set of customers to a...

[Vinod Aggarwal, executive]

Yes, yes. That's why I said in some of the road as a category, maybe which is very strong in 5, there is a space of 650, right? We can look at that. So what we always look at is we are a company we don't do too much. That is also very clear, right? We don't have very relenting. We do a focused approach. Whatever product which we bring in, it has to be successful because we don't think product and then start looking at what is an experience which we can give it to the consumer. -- we actually grow right along with the consumer, we write, we spend time, get the whole thing as I say well. Consumer is looking at before of an experience. So whether I can come out with a variance rather than giving a full new platform development.

So will give platform development is a huge effort. So what we are looking at is when we were doing this Jay and the P platform, we thought this platform should be expandable in a way that it can do adjacencies experience to the consumer. And what are that in the core product, then adjacencies, then variants, then color refreshes, that's the cycle which we are normally looking for these 2 platforms. That way if you look at made in India and the international market, there's a huge potential for us to exploit these 2 platforms itself. And in terms of addressable thing, which we were talking about, is the outside India, the market potential is so much like what it is there in India, and we have just started exploiting into the international market.

So our focus also has to be how that market outside with the platforms which are so successful now. And it is all the platform and the product is just 1 year or 2 years. So it is in the maturity cycle and it takes time to product also to get the maturity sector, then it has a huge potential. So we will not be doing... Right...

[Unknown Analyst]

Okay. Got it. So my second question was, like, internally, like when we look to price a new product. So do we look at profit on per buy basis or it's more like a cost-plus kind of approach that we look at.

[Vinod Aggarwal, executive]

Pricing is never on a cost plus [ Angus ]. We normally look at it what is the product what's the kind of access price point he is looking at from Royal entries and who is the source of growth was from the growth is coming and what is his EMI, what is that we have to look at it. So it has to be market focused rather than less focused...

[Unknown Analyst]

Okay. So just to get a sense, what you're saying is you're probably looking at the profit pool that you can capture rather than per by whatever you -- that's kind of...

[Vinod Aggarwal, executive]

We never approached it like that, we always because we always looked at it. There is a consumer who wants an experience on Royal field and is what's the value proposition which is looking at from the Royal and fee play a in success is that at the price which is paying us for Royal feels it's a dull which I'm just holding on and the value proposition is very good. That's why we always look at it from the customer and the market. What's the value which we can deliver, which the consumer feels that yes, Royalties has delivered a fantastic value for me for the kind of money which has even then that has to be very authentic.

So we always come from the rather than looking at the entire predict cost plus add up and all those things that we don't do is Generally, we do the benchmark. We have to do the case point of any product which comes in. We always look at it, what's the relative price index, where is the source of growth, what's that price point for them, what does it mean in terms of EMI per month. If you get a price like this those calculations we do, but we always look at the value for the consumer rather than just giving the pricing.

[Unknown Attendee]

Participants, that was the last question. Thanks to Mr. Govindarajan and Mr. Aggarwal for replying to the queries of the investors. For any unanswered question or any other query, please feel free to reach to Investor Relations team of Eicher Motors Limited. I'll like to hand over to Mr. Govindarajan for any closing comments.

[B. Govindarajan, executive]

Thank you very much. It's been a wonderful interacting with you people. As an organization, we always look at we are long-term focused. Internally, we say that we are long-term addresses anything which we do, we always look at it as long term. And that's why even in an investor meet much as when we all came and then explain to you that it is a growth-focused organization, and that's what we will be at it. When we are growing whatever the correct things which have to be done for the organization, we'll continue to do that. In Royal Enfield, EV is another one space, which we are now getting into that very intensely. In fact, I'm here last year, we are all spending time and understanding the whole ecosystem, what's happening, what sort of a technology which has to be looked at immediately, so both are the things. And maybe Vinod can add anything from the VC side for the closing.

[Vinod Aggarwal, executive]

No, I think we've summarized it very well.

[B. Govindarajan, executive]

Thank you very much. Thanks for everyone for attending this. Thank you very much.

[Unknown Attendee]

Thanks, sir. That's all from the investor conference call. We can close it now. Thanks.