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Eicher Motors Ltd
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Good afternoon everybody, and good evening to the participants from other part of the world. Welcome to post result Q3 FY '23 Eicher Motors Conference Call. We are pleased to get the opportunity to host the call.
So we'd like to welcome the senior management of Eicher Motors presented by Mr. Siddhartha Lal, MD and CEO of Eicher Motors; Mr. Vinod Aggarwal, MD and CEO of Volvo Eicher Commercial Vehicle Limited; Mr. B. Govindarajan, CEO of Royal Enfield Limited; and Mrs. Vidhya Srinivasan, Chief Financial Officer, Eicher Motors. So without wasting more time, I'd like to hand over the call to the senior management.
Hello, everyone, and a very good afternoon, evening to all of you, and welcome to Eicher Motors Limited earnings call for quarter 3 of FY 2022-'23. I hope you're all doing well. As we finished 3 quarters of financial year, I'm very happy to report that we are faring well across all business and financial parameters, both at Royal Enfield and at VECV, so all of [indiscernible] well.
At Royal Enfield, we've seen 2 big launches over the last couple of quarters with both motorcycles doing extremely well in the market. And after hiatus of 2 years, we're back with the largest celebration of motorcycling community that we have at Royal Enfield, which is Rider Mania and this year or let's say, late last year in its new avatar called [motor bus]
And we also had a very successful global media launch for the Super Meteor which is our new flagship motorcycle in our range, called journalists from all over the world came in Jaisalmer in Rajasthan this year, and that's in January, and we've got absolutely tremendous reviews from everyone on that.
And while our overall growth story in international market continues to gather a lot of momentum, we've also performed extremely well in India this quarter. We've registered a highest ever market share of 8.1% in all motorcycles sold and nearly 1 in 3, that's nearly 33%, of all motorcycles above 125 cc. So we're nearly 1 of every 3 motorcycles above 125 cc of Royal Enfield now. And we're really expanding the market of premium motorcycles as we speak. In addition to all of that, we've also taken some large strides towards our long-term vision of sustainable mobility by making a strategic investment -- by making a strategic investment in Stark Future in an initial equity investment of $50 million, translating to around 11% of the equity.
And we also started a partnership and collaboration by completing a collaboration agreement with Stark Future for research, development, parts, aggregates and sharing of technology and technical licensing and manufacturing. So we really believe in the -- we've scouted around for years in electric mobility space, and we've looked at scores of different manufacturers and startups. And we really like the team, the product, the philosophy at Stark and we believe it's an excellent collaboration for us for years to come. So we're really excited about that, both in supporting Stark for the tremendous potential that they have and back for Stark to support EML and RE in our very ambitious EV program. So that's on EVs for this time.
And at Volvo Eicher Commercial Vehicles, we've continued to strengthen our market presence around -- across all key segments, which is light and medium duty trucks, heavy duty trucks and the full range of buses. We've showcased rage of our capabilities through multiple future-ready products, which include 13.5 meter electric Eicher bus. This was all an Auto Expo last month. Hybrids and power truck, a combination CNG/LNG hybrid vehicle. And Vinod will -- Vinod Aggarwal will tell us more about the highlights of VECV and the Auto Expo a bit later.
And coming over to our financial performance this quarter. I'm delighted to announce that we reported our highest ever revenue, our highest ever EBITDA and our highest ever profit after tax at EML. So the consolidated financials of the third quarter is that we had a -- this is, of course, -- the revenue was INR 3,721 crores, which is up 29% from last year for the quarter. EBITDA at INR 857 crores, up 47% from last year. And a PAT of INR 741 crores, which is again the highest ever for EML and up 62% from last year. So overall at EML, we continue to maintain a laser-sharp focus on our future strategic growth plans along the robust ESG vision. I'm elated to share that for the second year in a row, we are amongst the top 10 global automakers on the prestigious Dow Jones Sustainability Index, which is a very important measure for us.
And to conclude, I'm extremely confident that we are on a great and accelerated and sustainable growth path for Eicher Motors Limited. Thank you very much. And over to Govindarajan, CEO of Royal Enfield, who will tell us more about the business at Royal Enfield. Over to you, Govind.
Thank you, Siddharth. Hi, everyone. Belated New Year wishes for everyone of you. At Royal Enfield with our strong and robust business fundamentals and a passionate team, that's what we are, I'm happy to say that we are continuing to make excellent progress towards our near- and long-term goals, continuing our mission of becoming truly global motorcycling brand. We've made definitely progress this year and specifically in this quarter. As Sid mentioned, we launched the Super Meteor 650. We had unveiled an ikman. There's an excellent review that was just an [indiscernible]. Then subsequently, we showcased in the Rider Mania with our motor bus.
And the third -- actually, we actually launched it across the globe from the Rajasthan. It has been a brilliant response from everyone across the globe. We're super happy to share even the Hunter 350, which we launched, won the Indian Motorcycle of the Year, IMOTY 2023 this year. Since its launch in August, this motorcycle has been receiving unprecedented appreciation and love from consumers across the globe. First, we launched it in India. Now it is also available across the globe. Rider Mania in 2022, as Siddharth mentioned, that's -- we opened it as motor as to our rider community. We've reimagined the Rider Mania, which brought in new spaces, new stories, new activities and experiences.
This year, in Rider Mania, we brought together almost about 14,000 riders, their journeys, their stories, their missions and much more in 1 inclusive space at Goa. There's tremendous enthusiasm from the community, which was represented by riders from 25 countries across the globe. As far as our international footprint is concerned, just to give you a highlight what's happening is there is the strong growth momentum, which is continuing in our international markets. With markets like Americas region, Europe and APAC, there's a significant growth, which has been happening. In all these markets towards our longer-term ambition, we also started looking at CKD facility. So this quarter, we inaugurated a new CKD facility in Brazil, which is our third motorcycle assembly unit in Americas region and our fourth across the globe.
The inauguration of the CKD in Manaus, which is in Brazil, is a testament to our commitment to the region and the significant potential that the Brazilian market holds for RE in time to come.
During this quarter, we also signed an agreement to set up CKD units in Bangladesh and Nepal because all other countries are also looking at CKD. And both these markets are also promising potential for Royal Enfield. And these facilities will be coming into action in course of time.
Our Vallam Vadagal manufacturing plant which is the second [Technical Difficulty] which we commissioned has been awarded as a future-ready factory by Frost & Sullivan. It has been a proud moment for all of us who are involved in setting up this world-class manufacturing facility.
To share some of the highlights. Our total sale, which is domestic and international put together, we did a sale of almost about 219,898 motorcycles in this quarter, which is up by about 31% on a year-on-year basis and 8.1% higher than the last quarter in this financial year.
Domestic market. India sales was about [ 202,100 ] units, which is 54% year-on-year and 10% higher than the Q2 financial year 2023. The volumes are steadily increasing, and it is improving for us. As Siddharth was mentioning, our market share gain is -- it's in a very healthy pace, highlighting a strong brand positioning in all these markets.
International market. Sales in international market is about 17,789 units in Q3, marking a growth of almost about 4.4% over last year. We continue to progress on our vision of becoming a global motorcycle brand from India, notwithstanding the macroeconomic headwinds in global markets.
International retail performance for the 9 months FY 2023 has been robust, and we have clocked a solid growth range from 37% to 48% across various regions, backed by our robust launch of new products which are there in the pipeline. We are committed towards sustaining the strong growth momentum in the international markets as well. So we are looking forward for a very positive Q4, too.
Now I will hand it over to Mr. Vinod Aggarwal to walk us through about the VECV financials.
Thank you, Govind. Good afternoon, and I will begin with financials for VECV. Our total sales in Q3 have been 18,162 units, up 13.2% from 16,044 units in Q3 of last year. Our revenue from operations are INR 4,603.9 crores, up 27% from INR 3,625.7 crore in Q3 of last year. Our EBITDA has been INR 304.95 crores, up 26.2% from INR 241.55 crores in Q3 of financial year '22.
Our EBITDA margin is 6.8%, and this is same as was there in last year Q3. And our profit after tax is INR 1.16 crores, up from [indiscernible] Profit after tax has been INR 160.3 crores, up from INR 67.7 crores in Q3 of last year.
We listed robust volumes across the board with the highest Q3 sales at 18,162 and we listed highest ever Eicher and Volvo heavy-duty truck sales in the quarter of 5,241 units, and our market share in heavy-duty trucks now is more than 8% of both Eicher and Volvo trucks. Our continuing focus on improving dealer satisfaction and uptime for our customers is showing in high levels of service and part sales, as our customers leverage our expanded dealer network.
We have highest ever quarterly parts business of INR 295 crores, registering more than 20% growth over Q3 of financial year '22. At the recently conducted Auto Expo 2022, we have showcased a glimpse of our capabilities through multiple future-ready product lineups aligned with the government of India vision for efficient logistics and decarbonized auto industry. And we unveiled, as Siddharth mentioned in his address, we unveiled India's longest Eicher 13.5 meter electric intercity coach. We unveiled Eicher 2049 4.9-ton GVW electric distribution truck for near city and intracity distribution.
We unveiled LNG driveline for long-haul trucking, both in Volvo and in Eicher brands. And we displayed hydrogen ICE and hydrogen fuel cell technologies.
With that, I hand over back to you for further questions-and-answers.
We can start off with Q&A now, Basu and Divya.
First question, we will take from the line of Prithyani Gunjan.
Can you hear me?
Yes.
Yes, loud and clear.
Yes. Okay. I had 2 questions. Firstly, on the margin side, I just wanted to get sense from you all as to where are we on the metal correction as large part of that reflected in this quarter. And in terms of incremental, how should we look -- should we be looking at the margins because there was a mix impact, which is quite significant for the last 2 quarters? So maybe some color on incrementally, how should we be thinking about the levers both on the positive and the negative side on the margins?
So Gunjan, I think -- so let me give you on the GC level, which you are talking about. First and foremost, everyone of you -- I'm sure now you all would have seen it, the commodity pressure is not there. So it has to start flowing in. So coming quarters, it will start flowing. It started flowing even in this quarter. In the coming quarters also, it will start flowing in. There is one more, which I just wanted to bring in, maybe Vidhya can add on.
At Royal Enfield, when we do a price correction or something like that, for us, more than the price correction, the consumers have to get protected. So what we have done is for all those consumers who have actually booked our motorcycles even though at a particular point of time, we increase the pricing, we said we will give the price protection for all of them till we offer the motorcycle once to them. If they take a decision to actually not taking the motorcycles and I'll take it later, that's fine. So till we actually give the opportunity for them to say, yes, I'm taking the motorcycle, we will do the price protection, that will also flow in.
In the last quarter call as I was just mentioning, we've done a platform change, which is [GC] platform. It has just been there in the market for the past 2 years starting from the Meteor 350. Now the value engineering, all those activities will start kicking in. So there are a lot of activities which are happening around the GC. I hope that gives that -- the overall sense of what are we doing on that area.
I think Gunjan let me add to that. I think on an absolute level, first off, our gross profit has increased to about INR 1,555 crores, which is an increase of 4% quarter-on-quarter, 34% year-on-year. On a YTD basis, our gross profit per bike has increased by about 2% versus the same quarter in the previous year. And also on a YTD basis also, it's increased by about 2%. So those are the good things which are happening on a gross profit standpoint. As you rightly mentioned, there's obviously been impact of product mix as well as the international mix which is flowing into our sea. And I think what Govind has already mentioned, we have taken price corrections of about 1.5% on Hunter as well as Bullet in the last quarter.
And as we mentioned, we have been protecting the customers from order book standpoint as far as the margin is concerned. But I think we're expecting to see that benefit flow through into the GC. Yes?
Okay. So just to get this right, when you mean price correction, you mean that you all have taken price increases and you're still giving the prior order book at the long-term prices? Is that understanding correct?
That's right, Gunjan. To an extent, as I clarified because consumers have come back and then say, "We love your motorcycle, and we are booking and willing to wait." In between because of whatever the business, we increase the price. As an organization for us consumer comes first, we always said, till we offer the motorcycle to them, we will do a price protection for them.
So it does mean the price increase, which is to flow into our P&L will happen later point of time. But that's important for us because the consumers have to be respected in that form because they believe that there is a possibility that this motorcycle will be available to me at a particular point of time.
Okay. So the steel benefit is also yet to flow through, and this price benefit is also yet to flow through. That is -- that are the incremental positives that we should keep in mind?
Partially [indiscernible] we can't say that it will flow through 100% now. Partially, it would have flown through...
Yes, Gunjan, what happens is all these commodities corrections, which you do in a particular cycle, we take a quarterly cycle, but it can -- which -- the cycle can go in between the quarter also. So sometimes what happens is with the inventories there at a particular price point, then that gets consumed the commodity advantage which is there, it will start flowing in the quarters. Partly, we have taken, the money will flow in.
Okay. Got it. And the second question I had was on the model launch pipeline. I know you don't talk each what model, what timelines, but maybe some color on how should we be looking at F '24 in terms of new model introductions or refreshes to the existing portfolio, even a broader commentary on the number of interventions that we could see will help us think through the volume growth for next year?
In 2023, we launched Hunter, and I'm sure everybody will be doing the market check. It has been doing outstandingly well for us, which we wanted, a new set of consumers have to come in into the Royal Enfield fold. That's what it is exactly doing to us.
Then on the learning which we had on the [cruiser] through our Meteor which we used it for J-platform launch, we actually launched even the Super Meteor, we launched a Scram on the Himalayan platform. So as we always mentioned, constantly we keep looking for what are the adjacencies which are there, which the consumer wants and experience across the globe. We being a rider, we also constantly keep looking at what's the kind of an experience that the consumer wants and we keep doing it. And there's no new product which can come in 1 year, right? All these things have to be thought through almost for 3 years, 4 years window. So we have a very healthy new product lineup which are there, which we will come in the next few years one after the other.
[Operator Instructions] Our next question is from the line of Kumar Rakesh.
My first question was around Bullet 350 CC that has to go on J-platform, and I'm guessing it could be any time soon we will be launching that. So will this transfer increase the cost and price for the product?
I'm sorry, Rakesh, we're not going to comment on future products. So that's a potential future product that we can't comment on that.
Fair enough. I have a question on VECV margin as well. So VECV margin expanded by about 100 basis points quarter-on-quarter, while commercial vehicle peers, we have noticed expanded much stronger margin on a quarter-on-quarter basis, more than 200-300 basis points. So where did we lag in margin expansion, while we are hearing that discounting pressure has reduced at least in the last quarter? Or do we expect more margin expansion to happen in the coming quarters?
I think you have to look at the consistency in our margins. If you look at the margins of other companies, there have been significant ups and downs. So this quarter, they have shown good margin and whereas the early quarters, they have been showing very low margin. So whereas now we have been very consistent. And so as we mentioned, there may some positive impact flowing partially due to the mobility crisis. So therefore, we cannot make the forward statement that how much it will go up. However, we are on the right trend.
Got it. Just kind of clarification to Gunjan's question. So, you talked about the price protection to customers, in our current order book for the models, do we still have some orders left with price protection or is that largely over in March quarter?
So at a particular point of time, if we took a price increase, if there is an order book which was there for those consumers first line we offer, obviously, we will do the price protection. So that's a philosophy we will continue from our end.
Next question is from the line of Pramod Kumar.
My first question is on the export outlook. Given the macro headwinds that we are facing, if you can just help us understand how do you look at the export potential in the near to medium term? And given the fact that we are also establishing CKD plants now, will that help us further in terms of pricing in the end markets? And how should one look at export outlook for, say, FY '24 because we've had a spectacular run for the last 3 years? And now even with Hunter export starting in the last quarter, how should one expect growth outlook for FY '24, Govind, in terms of -- should we be looking for the 10,000 to 15,000 kind of monthly run rate going forward?
Look, I think -- Pramod, thanks for the question. It has been always said outside India, the potential is very high for us, okay? And we always look at it as it's a long-term growth, which we have to take in. And as an organization, we are also the long term [indiscernible] In the international market, at a point of time in the platform have to be enriched. So from the twin platform, which we first brought in, then subsequently, we had J-platform, all the products around that. Today, they are all Euro V compliant.
So globally, you can actually sell those motorcycles. What we have done is, we started looking at community building and retail outlet expansion activities in all the countries and also started looking at CKD in all those markets, which is where the market is very good.
So all those areas, what we have done is all the background activities, which has to be done in the market growth is what we have been focusing on. This year, it has been showing that the market is growing. We also touched on the macro economies. I mean, nobody can escape from area, that sort of an impact. But as of now, the proxy which we are looking at is how is the schedule of auto component industry from the Europe manufacturers and how is it going, that's not showing anything very adverse. So that's the first. And mobility area is continuing. So I mean, we are hopeful that we will not have any major impact because of the macro economic indicators.
Second question is on the domestic demand side. Given the kind of steep price inflation, what we've seen because of regulations and various other factors. Your Hunter launch has kind of really been a big hit to the customers because you, in a way, have kind of dialed back the price increases effectively without compromising the product and the entire Royal Enfield appeal. So given the success of Hunter, is there a thinking that potentially you can do more on those lines in terms of probably more fresher designs, which can kind of attract more younger customers and address the -- widen addressable market for Royal Enfield? Because Hunter has been the -- one of the biggest hits in the entire tool industry in the last few years. So is this something which you are looking that we can probably do more on that kind of slightly more affordable or more lower-priced product as a strategy and more designs along with that?
What we know as a team, which we have been also discussing with the team is, we have to do a lot more even in Hunter also, Pramod. So we launched it in August 2022. So it's a partial year. And this year, it is going to be available in full year.
We also had the mix changes, which were there between the retro and the metro, which also has been -- now the focus is brought back in the company. And all the rural market, hopefully, the spend also starts up in that particular area, so there's a huge potential of all the youths in that particular area also.
It is actually doing what we were intending to have it in the company of getting new set of consumers, younger audience who love the brand Royal Enfield, but we wanted the motorcycle a bit more agile and easy for them to maneuver. And that's exactly answer. So there's a huge potential for Hunter itself in domestic and also in international market. We're yet to exploit that itself. So that's why it will be focus just now.
So Govind, do you expect Hunter share to kind of volumes to keep getting better and better? If I understood what you said you're seeing more upside to the Hunter volumes in domestic market?
We feel that all our products are in a better position to actually grow. When the market opens up more and more, it [Technical Difficulty] grow. And as an organization we're also telling you. So all those products, along with the market has to grow now. The best thing is Hunter, which is getting new consumers, it's not cannibalizing classic. That's a good sign for us. All the markets wherever we have seen order wise that whether it is getting new consumers, and it is getting.
So when the market opens up, you all know in the domestic market, the market is not so, so good for everyone. And when the market opens up, it's going to be really good for us because that's how we have been gaining [Technical Difficulty] market share. So the lead indicator for even to understand that the brand is being loved, the products are very good, there is an acceptance in a market which is not so buoyant, but still when the market share is being gained, when the market is actually coming back, we hope to see that our -- all our products also will be doing well, Pramod.
Next question is from the line of Hitesh Goel.
My question is first on the -- if I look at the consolidated EBITDA minus the stand-alone EBITDA, right, there's not much contribution in this quarter, right? So can you talk us through what has happened here because it was showing some INR 17 crores, INR 18 crores kind of EBITDA contribution coming from subsidiaries. So can you please talk about that first? Then I'll take my second question.
Yes. I think to some extent, obviously, there has been EBITDA which is happening, there is subsidiary. A little bit from a timing standpoint because we are building up inventory for season. And because of that, there is a little bit of a reversal of EBITDA, which we are looking locally. I think we've talked about it in prior quarters. I think that is what is showing up in the difference between standalone and consolidated.
There are no launch expenses or something in the abroad subsidiaries because of Hunter exports...
No, no, no. So basically, when we send inventory from India to global subsidiaries, we are building up for the season because we are moving with the season in some -- in Europe as well as North America, so some -- that reversal is taking place which is essentially impacting it.
Okay. And on the -- my second question is on the stand-alone business. Basically, is my understanding right that on a Q-on-Q basis, there has been a 5%, 6% shift towards Hunter? So like you had spoken in earlier quarters, there is an 8% lower gross margin on Hunter. So when I compute this, there's a 50 basis point impact on gross margin from Hunter. So there's 70 basis points coming through raw materials in this quarter, is that the right way to look at it?
I think approximately, the way is to look at it is that we have a 0.5% upswing in terms of commodity price improvements, which is reflecting in our gross margin.
Okay. Okay. And going forward, you're saying there will be more commodity benefits yet to flow through because of the lag effect, right, in the fourth quarter?
Well, I can't give you too much...
As has been discussed, Hitesh, it's partly flown -- partially has flown and yes, it will -- because commodities as of now, it is not showing, but there are enough resources, which is also coming back and then saying if China picks up, how the commodity will behave on all of those things. But yes, when the commodity is easing out, it actually flows into the P&L.
We have next question from the line of Raghunandhan N. L.
Yes. Am I audible now?
Yes.
Yes. My first question, considering the positive reviews for Super Meteor, how do you see the potential for the product in domestic and export markets. I mean providing credible upgrades for existing 350 cc vehicle owners has been an objective for the company. So how do you look at strengthening the portfolio in larger cc products and looking at upgrading customers?
Raghu, we have lost you in between.
So I'll just repeat my query. So Super Meteor has received strong positive reviews. How do you see the potential in domestic and export markets? How do you see the trend of upgrading the existing 350 cc vehicle owners towards higher cc's? And how do you look at strengthening the portfolio in the larger cc products ahead?
So if you're looking at -- Raghu, maybe I'll refresh the question, if you're asking how is the Super Meteor 650 will help in the upgrade cycle for Royal Enfield, if that's the question. So am I right?
Yes, sir. Yes.
Okay. So let me just articulate if I can add on this. As Super Meteor 650 is on the platform of 650 twin engine. We came out with Cafe Racer and then we also came out with an Interceptor, which is a roadster. Now we wanted to come out with one more motorcycle, which is actually a cruiser. So that's what is Super Meteor 650, which we launched.
When we launched in our motors without even announcing the price and all those things, there's a good response of actually people coming and booking. We got a good number of bookings then on that day itself. Now it is also being exported to other markets.
It's just opening a segment for Royal Enfield, which is already existing. Cruiser is existing everywhere. But everyone is looking at an easy cruiser, thoroughbred and it is from Royal Enfield which is easy for them also to maintain. It is not too heavy. I mean people won't get intimidated, but it should have a solid presence, and that's what is our Super Meteor 650 and all the journalists who came, rode along with us at Rajasthan, everybody came back and then said, Royal Enfield has got a good cruiser for the global audience.
So it's in initial stages. The response from the journalists and from the consumers have been very good. We are very happy about that. We'll -- it opens up for our consumers. As I mentioned, it can be a Continental GT, which they can take on or Interceptor they can take on or Super Meteor they can use depending upon what sort of an experience he wants from the particular product. Now we are giving more offering on the 650 platform for our 350 existing consumers who want to do an upgrade.
My second question to Vinod, sir. Sir, with the RB norms coming up, how do you see the -- by when do you expect the model changeovers to happen? And broadly, what is the range of cost increases?
Sorry, I didn't...
[indiscernible] and cost increases...
Raghu, this is for OBD2 norms, are you asking?
Yes, sir.
And for VECV. Okay. Over to you, Vinod.
Yes. Model changeover is going to happen in quarter 4 in a phased manner. And by 1 April, we will move 100% to [indiscernible] And of course the -- as far as the cost increase is concerned for that, it is not going to be like earlier the BS IV to BS VI, it will be much lower than that, which should be within, I think 3% or 3% to 5% itself.
Sorry, sir, I missed it. It will be below 5%?
Yes. Below -- around 3% or between 3% to 5%.
Our next question is from the line of Chirag Shah.
Yes. Sir, the first question is for Vinod, sir. Sir, so are you looking to build up some inventory in anticipation of presales kind of a thing? Or you are looking to transition from here on and willing to sacrifice some volumes, not take the risk of creating an inventory in the system?
Of course, I don't think we are going to create any inventory for having this benefit. So there is no such plan. And I don't think we will suffer because lack of production because we are already -- a lot of our models will move to OBD2 even quarter 4 itself. So there is no concern on production or inventory buildup of OBD2. So we don't see any concern.
Okay. No, I was just trying to understand, are you looking at [indiscernible]
No, we are not going to build any inventory for earlier models.
Sir, second question is Royal Enfield on Hunter. If I have to understand after 5, 6 months of Hunter performance, what is the assessment in general in terms of potential ramp-up of Hunter? And is the production capacity geared up? Given the commentary by Govind that rural market are still unexplored or not completely explored, can we expect a significant ramp up in Hunter volumes from current monthly run rate and is production geared up for that?
Yes, Chirag. I think production-wise, initially, as I mentioned during the retro and the metro, we had focused activities, which has been done. Now it is all sorted. So ramp-up is not a problem. Second is, as far as the market is concerned, as I mentioned, now we will like -- because of the ramp-up, which has come in and all those things, so now we will start looking at actually exploring more and more markets with Hunter.
We can assume that if there is a demand, you can increase the supply of Hunter 25%, 30% from current run rate. Is that a fair way of in terms of your capacity planning?
Yes. Yes, Chirag.
Our next question is from the line of Amber Shukla.
Sir, just one question on supply chain. So is there any supply chain issues still persisting or we will see production recovery from here on?
Supply chain is not the top of the mind issue at this stage. Having said, if I have to tell you that, is it all completely sorted for everyone, still some niggling issues then and there, but that's not a top of the mind issue that everyone have to be alert at every point of time. So it's pulling its weight now.
The next is from the line of Nishit Jalan.
I have 2 questions. Firstly, in the last con call, you had talked about that since Hunter model was just launched. The sale of accessories with Hunter model was on the lower side. So just wanted to understand how are things picking up on that front?
And secondly, on the production side, correct me if I'm wrong, we have a capacity of about 1 million units on an annual basis? And any plans to ramp up the capacity? That's it for my side.
Nishit, first is about the motorcycle accessories, which you asked for the Hunter. In our motorcycle access -- genuine motorcycle accessory business has been steadily growing. We have almost about 587-plus SKUs which we have added up in terms of styling, safety, comfort in various experiences, which we can add on to the motorcycle.
Initially, when we launched Hunter at that point of time, the JMA testing and all those things are going on. Now those are all sorted out. So now the consumer can actually go through the Configurator which is there through which he can book and visualize the Hunter along with the motorcycle accessories and book.
Second, you asked about the overall capacity. Yes, we just at quarter 1 itself, we have mentioned. Our installed capacity is protected for the near future requirement. Having said, any increment which is required, it is not that we have to do it from a scratch. It will be an incremental investment of debottlecking some of the areas. And that's also not a very long-term kind of an activity wherein you have to wait for it to get the capacity coming in. So it's all sorted. So some areas where you have to do a balancing activities, which is short-term activity is possible for us to do.
Sir, just a follow-up. So this accessories on Hunter. So fair to assume that in the quarter gone by, whatever way you track your accessories that's a percentage of vehicle price on that metric, was Hunter at par with other models? Or do you think it is still ramping up, and we will see that happening in the coming quarters and was not the case in total.
No, we normally look at more than motorcycle and all those things, which is an internal metric. What we look at is our offerings to generate motorcycle accessories, how many consumers were buying motorcycle are actually looking at our motorcycle accessories also when they are buying a motorcycle at their dealership or at our retail outlet.
Adoption is good. Everybody started looking at the quality of our motorcycle accessories at a different level. So at the time of purchase, people started buying our motorcycle accessories. And the number of SKUs also have gone up. So there's a choice for the consumers to look at, as I mentioned, on different experiences, which you can take it through our motorcycle accessories as I mentioned, it is comfort, different seat configurations, which are there, style on different color configurations, which can be actually taken up through that. And on the safety, on the engine guard, we have different varieties which are there.
In terms of other touch free components, all those areas. So the SKUs are going up. So to that extent, the penetration of the accessories by all the consumers when they are buying a motorcycle, it is going up. Also for the older motorcycles, when they come for service, there also now we started actually selling the motorcycle accessories and the traction is good there, too.
Our next question is from the line of Aditya Jhawar.
Sir, if you can just clarify on the previous participant's question that Hunter is about 800 basis points lower gross margin versus others?
I don't think we've actually made any such statement.
Yes. So that is not the case you are saying, right?
No, we've not made such statement [indiscernible] it's case or not, right?
Yes. My second question is, sir, do we have a target in mind in terms of what could be our volume contribution from Hunter on an overall basis in the initial year, possibly it is slightly on the higher side? Or should we expect a contribution in the similar range in the next couple of years?
Aditya, we don't actually look at the numbers. For us, numbers is always a derivative. We always look at what sort of an experience we give to the consumer, whether what we envisaged, the kind of an experience which we have to give it to them, whether we have given.
What we look at is, we go back to the community and then say, this is what is the motorcycle which we have made. This is the kind of an experience which we can offer. The community actually takes on, and that's how our numbers come. So we don't put a number to -- within ourselves also and then say, oh, go and gun for that number. That's not the way we work as a business.
Our next question is from the line of Kapil Singh.
Sorry, I joined in a bit late in case it's a repeat question. I can take it offline. Just wanted to understand your views on pricing. Where are we -- are you comfortable at current level of pricing? Or do you think that you need to raise the pricing and recoup margin over the next 2, 3 years? .
You're asking comfort on the pricing?
Yes. Basically, at current level of pricing and gross margins, is it something that you are comfortable at? Or do you think you need to raise it and improve gross margins over the next 2, 3 years from current levels?
I think, Kapil, pricing is not always the businesses that we have to be looking at internally, right? Pricing has to be looked at from what value proposition we give it to the consumer as a product and what's the overall thought of the particular product from all these 6 Ps which we do there. Time to time, we always look at what is the market, what's happening in that, what's on affordability and accessibility which the consumers are looking at? And what's our product offering then and where should we price? So we always look at it strategically from the consumer end rather than from cost-plus type.
Okay. So is there a -- like, is there a target margin range you want to operate in or this will remain dynamic depending on operating conditions?
Depending upon...
Again, we don't get forward-looking targets and all that, so we can't let you with that.
Okay. But is there a target margin range that you look at? I don't want the numbers, but I just want to understand how you think about it?
No, Kapil, to be honest, maybe you joined late also, as we mentioned, we don't give any target contribution level target numbers. That's not the way we work. We always look at what's an experience which we have to give, let's be focused on that. That's what we do.
Our next question is from the line of Sridhar Kalani.
Yes, so my question is regarding other income. If some light could be thrown up on the same because since I can see it's like 100% Y-o-Y growth can we see on a 25% increase from Q-o-Q, so if the management would share some details on the same?
I think we had -- as far as other income is concerned, we've had some -- the additional income from -- you're talking about other comprehensive income, right?
No, the other income, other income.
Yes.
So from the non-motorcycle segment, I can see some other income being shown up...
Yes. I think [indiscernible] interest income which is coming in, but we will give you the details of that, definitely.
So is it just the interest income or there have been some ForEx gain also?
Sorry? I can't hear you properly.
So I'm saying, is there just interest income or ForEx gain also?
No, no, it's largely interest income, yes?
Okay. Okay. And also, if you could give us a sense about the international -- in the international market, how is the ground level demand? Because as per other OEMs, there seems quite some weakness for the next 3 to 6 months. However, since Royal Enfield caters to the premium segment, some views on the ground level from international market from your end?
Look, I think, as I mentioned, if there is a macroeconomic indicators are slowing there are market conditions, nobody can escape out of it. At a current level, what exactly is happening for the Royal Enfield that demand is good, the interest of our motorcycles are good. Super Meteor 650 which we have launched, they're just getting delivered into the international markets. And that's one such motorcycle, which the international consumers have been looking for from the Royal Enfield stable. So to that extent, and we have stocked well for the coming season. So we are prepared to address to the market.
But if the macros actually turning out to be negative for everybody, nobody can escape. So everybody have to look at strategically what is that we can do at that point of time. We have to wait and see for some more time, how would this turning out to be in the future.
Okay. So I can say that we are a bit cautious [indiscernible] on the whole demand side, right?
From Royal Enfield angle, yes.
Our next question is from the line of Hirenkumar Desai.
Yes. One question is, again, regarding the exports. Over a medium term, let's say, 2 to 3 years, are we targeting any proportion of revenue coming from exports?
We look at international market as a huge potential and -- as I mentioned, we are a focused company. We look at how do we build the community outside international market. That is what is the focus. That's very promising to us, business comes.
Yes. And what we're tracking is our market shares. So we look at our relevance in each of these international markets. That's of supreme important for us. The actual proportion of international to full business is a resultant, right? I mean it is going up, it will continue to go up.
But we don't care about it as much because we can also go India market. So the idea is not to -- well, I mean, in most likelihood, international will outpace in the long term. Of course, in some years India may outpace, in some years international, but really, I think the most important thing we look at and we track and we're actually doing extremely well in the market shares in midsized market in U.K. I believe we're already #1 in midsize right?
That's right.
We've crossed all the Japanese players who are the #1 in midsize. Look, we have double-digit overall market shares in midsize. In other markets, in U.S., Brazil and all, we are in high single-digit market shares. So that's what we're tracking very closely right now to start improving our market shares in midweight motorcycle segment.
Yes. And second question is related to the supply part of our motorcycles. So right now, do we have enough capacity to serve local as well as export markets or we are having to sort of ration either local or export markets?
No. Supply chain is not a above the mind issue right now. So -- can actually supply the demand depending upon the model mix, depending upon the country requirement, all those things is possible now.
And just 1 last small thing. Do we have a waiting period at the moment?
We have a healthy waiting period for products. It depends upon the product, it varies.
We have our next question from the line of Vipul Aggarwal.
Am I audible?
Yes. Please go ahead.
It's again on export side. Now since we have strong product line and decent penetration in export market in terms of presence, can you give some flavor on how the marketing strategy working out in export market, maybe region-wise or country-wise, if possible? Like where are we in creating the segment for Royal Enfield in developing countries like you did in India? And how is it the segment expanding in the developed markets?
See, first and foremost is our focus is in the middle weight outside India also. Our North America, Europe and [Technical Difficulty] now LatAm is also added into this. That's why we have gone in for the CKD operations also. As far as the [Technical Difficulty] one is the community [Technical Difficulty]
So what our focus is on the community build and on the brand building activities, which we have to do. What we have done in [Technical Difficulty] like to actually go and we don't do that. So it will be a targeted marketing, building the community, reaching out to the consumers in the way they wanted [Technical Difficulty] which is picking up very well right -- picking which we will do.
Okay. I was more towards like, for example, in Indonesia, how are we approaching the market? And how far we have reached over there just talking about get some since like Hunter is a very good for these markets.
Vipul, [Technical Difficulty] you would have studied it, but it has restrictions on the local content. There is a quota, which are there. So we are trying to work around all those things. So it's a good market, but it has its own nuances, which we are around. So depending upon the priority in the business, we will keep working on that.
That was the last question for this session. I would now like to hand over the call to the management for closing remarks. Over to you, sir.
I'd like to thank you all. Thank you. I think we've had a great quarter at Eicher Motors Limited and lots of interesting developments. And yes, and looking forward to the coming quarters in the coming year. And thank you very much for attending.
Thank you very much.
Thanks.
Thank you, everyone.
Thank you.
Thank you. Bye-bye.
That will be all for today. Thank you so much, everyone, for joining us.