With Bullet/Classic refresh coming September-October, do you see opportunities for margin to pick up in the back half from cost takeout initiatives?
Thanks Chandramouli, you are iterating the point that growth is more important than margin. Glad you guys say the strategy is right. As value engineering pipeline is set. But you all know there is a commodity inflation pressure, availability of steel pressures. So supply chain team is quite busy solving things. But yes, value engineering work continues into the future.
Currently what % of exports is ASEAN, and what could it potentially become? Indonesia is the 2-wheeler market largest in the world after China and India.
For our brand and our kind of motorcycle, especially in the ASEAN market, the strategy is store-by-key-city, let it get pulled. That fundamental went in the market. Now all the products relevant to the markets are ready. We are cautious about opening further distributions. Where the confidence is that yes, open sensitive channel partners' profitability. ASEAN is important for us, focusing on developing over a period of time.
On margins — good to see stabilization. Are you specifically looking at various levers now? At a level spend activation point that remains less stable, no further big change in % of revenues you intend to spend. Some thoughts on value engineering and pricing interventions because it's been almost a year since you made the pivot. Are you getting to a level where this is a reset base where investments stabilize?
I will shift the conversation towards growth, Gunjan. Growth is the focus. Percentages, in fact, process is what the organization thinks. Absolute profit, absolute number, absolute EBITDA — understanding driving towards retail focus. Specifically on activations, every brand — Hunter new support, Guerrilla 1-year brand support extensively. Some new products refresh coming, also supported. Activations HunterHood continue. No big launch expenses this year. On pricing, we have taken a pricing increase in April and now with inflationary pressure, took to the extent in the month of July. We will continue to keep our product at an accessible price point because we want to grow.
Market has been expecting a 250cc foray by Enfield. Thoughts there? You always call yourself middleweight 250-750, you have straddled upper end segment quite well. Thoughts on 250cc foray?
We have been maintaining the middle weight is the focus. We are a very focused company, less fundamental philosophy. Too many things — currently J-Series, 350cc, Sherpa, 450cc twins 650cc, launched, us, huge there. I'm very confident that with the kind of premiumization which is continuing and our support activations financing doing, we already grow. Always maintaining weight 250cc 750cc.
Firstly, on Classic 650 — acceptance so far? Would you be increasing efforts ahead? Q1 volumes?
Classic 650 — honestly, it is a product which we all have been looking forward that it would do in the market. Acceptance is good, really good. Traction upgrade cycle slightly. Too early to conclude anything. People are loving the product. They're all saying it is very authentic. It is classic. It is on 650cc. It is definitely going to add — India, huge reception, UK, Europe areas. Variants — four colors brought in for Classic 650. Will give traction to come.
On VAVE benefit of 20 bps and you are working on projects for material reduction — how much benefit in quarters ahead?
We don't give guidance.
Recently Volvo, about two weeks ago, cut India growth estimate for MHCV to 3% CY '25 versus 8% previous quarter. Any comments why expectations lowered for MHCV space?
We don't see it like that. We see that there is a strong growth possibility which is there. Higher payload trucks, mining operations things continuing. Nothing correction place in the market.
Around growth, prioritizing since late when focusing it. Domestic monthly 80,000 monthly volume. Post September lapping volume. How do you push inflect higher here, keep ahead? Couple of initiatives materially pushing higher here on?
Well Kumar, this has to be seen from the context of whole industry. Indian 2-wheeler industry per se — path, in fact, lower than envisaged. 125cc hasn't grown much. Only middle weight has grown. Our focus, middle weight, growing. Our assumption had been when the market opens up and the overall pool increases, we have to focused growth, increases. On the contrary, we are growing, growing. Does mean acceptance is good. Recognized track study says ahead rest brands. If buoyancy comes in the market and the kind of activities we mentioned — products, funding, correction retail outlets optimizing places, geography changed. We feel we will grow, Kumar.
Historically, middleweight customers have significant overlap with passenger vehicle industry. PV industry has not shown strong growth in recent months. Do you see segregation between addressable risk eventually two growths again converge?
Good angle, Kumar. Maybe I'll also study and we'll see. Because so far always look at SUVs growing, size higher-end cars SUVs growing. If premiumization continuing, are, product. Haven't entry-level car is. Study more. Honestly, answer you.
Can you walk us through the company's pipeline of new LNG truck projects and development?
VECV is actually working on LNG and CNG. Currently full range ICE, electric, CNG LNG. In all the segments wherever there is a requirement for an LNG specific to the usages or to the geography, the platform is enough to adopt things. New development would be in longer period of time — faster to adopt when required.
On capacity — heading towards early-to-mid 80% utilization, do you head into 1 million+ annual volume territory? How are you thinking about growing the business over the next 5 years?
Our capacity stated is with both the plants, which is Oragadam and Vallam, manufacturing motorcycles for the globe. Stated 1.2 million. Currently, we are operating at 90% of that. We also mentioned during the last quarter call about our capex, which is actually going in fulfilling gap further up, as required. As we build, we place modules. We need heavy enhancement. Focus capex is on products. We have cracked the code on modular enhancement for the future.
On Hunter 350 refresh which happened in May — Bullet refresh was launched September and is up 10,000-15,000 Y-o-Y per quarter. Hunter looks relatively flat quarter-on-quarter post college buying. Is there a constraint? What is the outlook into the festive season?
We launched the new Hunter 350 around 27th April with a full refresh, USB added, flashy colors, targeted at youngsters. We launched HunterHood, a street culture festival to celebrate music, art, dance, lifestyle in cities. Traction pickup is good. Hunter, as of now, if I have to tell you, it is coming around 17,000 to 17,500 numbers per month, slightly lower colors gaining traction. Still early days; we are committed to build further with HunterHood platform.
Since you have changed strategy, who are the buyers coming in — change in profile? What is attracting them? Any color maybe on age profile?
Hunter age profile is about 24 to 26 — young audiences are liking the motorcycles. That is why we brought the motorcycle, silhouette, color combinations, CTGs. Continental GT is growing — demography is down even into 26-27 age. Each product has a specific experience and demography is slightly different. Bullet has age group of somewhere 30-34. In South, audience is enjoying Battalion Black.
On Bullet — we have seen a large increase in volumes, almost 10,000-15,000 per month. Are you noticing a change in profile of customers coming in?
Bullet last year, we opened up in the bastion market. In Q1, we sold 50,000 Bullet. The product was done based on customer feedback. Punjab, Haryana, UP, etc., post that, when opening, people enjoying Battalion Black. Bullet age group is around 30-34. In South, audience is enjoying Battalion Black.
On exports — seeing strong growth, particularly in Brazil. Any insights on these markets and learnings?
International markets, we are cautiously optimistic. Brazil — huge 2-wheeler market. CKD facilities in place. Two assemblers. Vidhya's team set up finance scheme — tying up with banks for customer experience. Slowly opening retail outlets. Interlogos 1,500 riders came together. Bullish on Brazil market. UK — preregistered motorcycles still there, slightly muted. Europe — taken distribution to own ends, getting fixed. Australia good. Thailand its own pressure point, Indonesia well. SAARC — both Bangladesh and Nepal accepted well, both CKD plants fully operation. Last 1.5-2 years spent fixing basics and preparing for markets.
On Himalayan platform — exports doubled Y-o-Y, but domestic seems stagnated at ~3,000 per month for several quarters. What is happening on the domestic side that is different from exports? Any interventions to increase domestic also?
First and foremost, the rare earth materials issue affected products. Problem in production. Platform materials were used in gear sensors, alternators. Pressure point — had to stop it, then start with alternative materials. The team had done a very good job of bringing it back. Scram was not available for a point in time. Now available. 450 Guerrilla platform — activities on the ground. Bringing Sherpa engine platform. Himalayan Guerrilla there.
Since you mentioned rare earth — at a company level, how are you mitigating that risk? Could it impact other models for two quarters down the line, or the EV launch? Where are you managing the risk?
So it is a risk which we anticipated some time ago. We started working on the alternative material at least three, four months back. Currently we are in production with alternative material — protected. Alternative material import is not a major issue for us. We are out of the situation challenge.
On the festive season in second half — market setup is soft. How are you thinking about festive? Bullet base effect is favorable. Do you feel confident outperformance sustains in second half when Bullet numbers are base year?
Festive — all of us are very bullish about festive. We are building ourselves for the festive season. Honestly, a few things work in our favor — expecting positive. New launches coming in, something like Meteor coming in, colors. Some of the launches, CTGs aligning with auspicious times of festivities — this helps bring momentum. That is planned. That is why I am saying positive outlook.
Can you share the rural salience in the mix? Has rural salience changed in the last few years vs now?
Rural has done very well for us in the last few quarters. We could specifically classify town/city — looked at states by states. Potentially the mix of rural states used to be about 30% of our sales, closer 50% of sales. Therefore, increased sales is happening predominantly in accessible coming. B. Govindarajan: The rural market in India has been growing slightly tepid. At least for our product, we have shown growth. There is green shoot — first growth after a long time.
On rural salience — geographical spread north versus south and within particular states like UP, what trends are you seeing? Customer profile walking in, financing penetration, skipping categories like 100cc — please help us understand. Rural customers gravitating towards motorcycles same time scooters off India.
Strategic question. First and foremost, we added a central zone — close to market. Central includes UP areas. Team continues growing that. In Q1, our retail has been very good. Bullet Battalion Black available, single-channel Classics, color refresh — audience really liking it. HunterHood focusing only major towns, now looking at smaller towns. On rural finance availability — dealers found it tough so we took responsibility of talking to financing, made available to all. 575 dealers already signed financing. Now they are seeing traction.
On commodity cost — how was the impact in Q1? What is expected for Q2? Steel prices, precious metals trending higher?
For us, steel has kind of hit a little earlier. Therefore, we've got impacted by steel aluminium. I'd say we've impact 50 bps. Out of that, we've got offset by VAVE, mentioned earlier 20 bps. Net impact 30 bps extent — price increase obviously offset impact overall.