Royal Enfield expands capacity, begins production from third plant

Royal Enfield has begun commercial production from its new manufacturing facility at Vallam Vadagal near Chennai, Tamil Nadu, India. Spread over 50 acres, the Vallam Vadagal plant is Royal Enfield’s third manufacturing facility and will manufacture Royal Enfield motorcycles for India and international markets.

Construction of the new facility started 15 months back and has been completed in record time. The new facility has been benchmarked to the highest level of quality and productivity. The manufacturing capacity in this facility will enable the company to meet its next level of growth.

In the first phase, the state-of-the-art facility begins with an installed production capacity of 300,000 motorcycles. In FY2017-18, the combined production capacity from all the three plants is planned to be 825,000 units. In FY2016-17, Royal Enfield produced and sold 667,135 motorcycles, nearing its installed capacity. The company’s sales have grown at a compounded rate of over 55 percent over the past six years. According to Royal Enfield, its order book continues to be strong and there is a large unmet demand. In FY2017-18, it plans to invest Rs 800 crore, largely towards capacity expansion at Vallam Vadagal, new products and platforms, and setting up of technical centres in Leicester, UK and Chennai, India. This investment will be funded through internal accruals. 

The capacity expansion is also part of Royal Enfield’s strategy to prepare itself from new competition. Bajaj Auto recently inked an alliance with Triumph Motorcycles to enter the midsized motorcycle space and there are a number of other domestic OEMs also eyeing this segment.