Strike at Royal Enfield's Oragadam plant ends; February sales fall by 14%

The new strike at Royal Enfield’s Oragadam plant, which reportedly resulted in a production loss of over 3,000 units, has ended. The strike that started on 9 February seeking a wage revision ended on 27 February, and regular operations have been resumed. It was the second strike at the Oragadam plant in less than three months.

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Apart from the wage revision, the workers were also unhappy with the re-designation of 521 temporary employees as permanent staff. Last year, the company’s plant was affected by 50 days strike that cost a cumulative production loss of 25,000 motorcycles for September and October 2018. The slow growth of sales and the strike at the plant resulted in a cut in the FY19 production guidance by 25,000 units.

The company told Bombay Stock Exchange:

The entire workforce at Royal Enfield's Oragadam, Chennai facility is reporting to work effective February 23 leading to resumption of normal manufacturing operations. The company is deeply committed to the welfare of its workforce across all levels.

Royal Enfield has been hit by various factors in the recent months and it has reported negative sales growth for the fourth consecutive month. Domestic sales of the Chennai based two-wheeler brand stood at 60,066 units in February 2019 as against 71,354 units in the corresponding month last year, marking a fall of 16% Y-o-Y. Overall numbers fell from 73,077 units in February 2018 to 62,630 units last month. Exports, however, continued to provide solace. The company exported 2,564 units in February 2019 as against 1,723 units in the same month last year.

Speaking about the sales performance, Siddhartha Lal, Managing Director and CEO Eicher Motors Ltd, said:

The latter half of 2018 was a challenging period for the two-wheeler industry in India. Factors like increased insurance requirements, rising raw material costs and the subsequent price increase due to regulatory safety requirements impacted the momentum of the industry.

Lal said that the negative sales are temporary impact due to a price reset. He further added:

Royal Enfield’s market share recorded improvement on a sequential basis, while volumes in the quarter were impacted. We believe this is a temporary impact due to a price reset. We continue to remain optimistic about the trend of premiumization in the motorcycling industry, and are confident that this trend will continue in the future.

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Exports have been delivering positive since the launch of the Interceptor INT 650 and the Continental GT 650. Royal Enfield offers the 650 Twins in India, UK, USA, Australia and Thailand.