Royal Enfield planning to buy Ducati
Rumours have been floating around for a while now about Ducati to be sold by Volkswagen’s premium car brand Audi. The German brand has been contemplating the sale of the motorcycle brand owing to the heavy losses due to the diesel gate emission scandal which in turn led to poor sales of its cars and major recalls across the world. Now, these rumors about the sale of Ducati by VW group have further led to the news of an Indian motorcycle manufacturer buying the Italian brand. The Indian company in question here is Royal Enfield as per a report in Times of India. Although, according to the same report, Siddhartha Lal, Managing Director, Eicher Motors declined the news. But, what if these rumors turn out to be true? How will it help in strengthening Royal Enfield’s portfolio and prove beneficial to both companies in the long run? Here is a break up of this news turning out to be true, if it happens.
The Indian company that has been present for decades has had its best year so far. A part of Eicher Motors, the brand sold 6.66 lakh units in FY 2016-17 compared to five lakh units in the fiscal year before it. The brand grew by 31 percent and has been listed as one of the most profitable automotive companies in the country now. The fiscal year that went by witnessed the Eicher Motors group growing to Rs.3, 500 crore mainly due to Royal Enfield. It is a good time for the Indian motorcycle manufacturer to invest in a company like Ducati as it would enable in sharing technologies and getting access to the premium motorcycle portfolio across the world. The deal would be more critical for Royal Enfield as it has been using the ‘dated’ OHV (Over Head Valve) engines for a considerably long time where competitors in its segment have moved up to lighter, more fuel efficient as well as more reliable technologies. The only new engine from the company was the new 410 cc motor that was introduced in the recently launched Royal Enfield Himalayan but it too leaves a lot of room for improvement when compared to the competitors.
Ducati’s entry in Royal Enfield’s portfolio will enable the Indian company to get access to new and relevant technologies, especially in the electronics domain, where Royal Enfield has little presence right now. The deal will also improve the brand’s global image to a considerable extent, similar to what happened to Tata Motors’ image after buying Jaguar Land Rover. The company should also look at the purchase of Ducati as a means of expanding its portfolio of larger displacement motorcycles if it wants to go global. Royal Enfield is already working on a new 750 cc motorcycle for the Indian market which has been spied a few times in Chennai. The motorcycle will open up a new segment of customers for the brand as it is expected to be priced at around Rs.3 lakh.