Eicher Motors down third day in a row, investors lose Rs 11,300 crore

Royal Enfield would be forced to reconsider its pricing/brand strategy very quickly as new players enter the cruiser market

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Eicher Motors share price fell over 2.2 percent on July 6, marking its third straight session of losses. The market capitalization of the company has eroded by Rs 11,300 crore during this period as investors fear Hero MotoCorp and Bajaj Auto to eat into the company’s moat.

At 12:30 pm, the stock was quoting at Rs 3,236.70 on the NSE. Trading volumes at 2,338,422 shares were significantly higher than 20-day average volumes of 784,861.

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Over the past few days, the premium bike market has heated up with new launches threatening to eat into Royal Enfield’s 90 percent market share. On July 3, Hero and Harley launched the Harley Davidson X440 which comes with a 440cc engine. The bike’s starting price at Rs 2.29 lakh is at a 15 percent premium to the Royal Enfield’s Classic 350cc and Meteor 350cc.

On July 5, Triumph launched the Speed 400 and Scrambler 400X. The Speed 400, a street naked motorcycle that takes styling inspiration from the bigger Street Twin 900, has been priced at an aggressive Rs 2.33 lakh. The models are in partnership with Bajaj Auto.

Also Read: Hero, Bajaj go for Eicher’s jugular in battle to separate the boys from the men

Both players seem to have very limited capacity to start with. According to analysts at HDFC Securities, the prices are likely to be introductory pricing and unlikely to be sustainable in the long run for the features/brands on offer.

“Nevertheless, RE would be forced to reconsider its pricing/brand strategy very quickly, which will in turn drive margin pressure. Accordingly, we have now lowered our earnings estimates by 16-18 percent over FY24-25E as we revisit our growth and margin estimates,” the domestic broking firm said in a report dated July 6.

HDFC Securities now has a target price of Rs 3,086 on Eicher Motors, from Rs 3,715 per share earlier.

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