Indian motorcycle company Royal Enfield wants to expand globally, and it is targeting Colombia as a key market. “Currently we are an Indian company,” CEO Siddhartha Lal told India’s Business Standard in July. “We want to be a global player.”
Royal Enfield boasts that it is the world’s oldest bike maker that has always maintained continuous production, and the company is best known as the World War II supplier that provided the British military with the “Flying Flea,” a tiny motorcycle that could be dropped by parachute along with paratroopers as they entered combat. The firm is growing fast in India and first partnered with the Bogotá-based Corbeta Group to begin distributing its bikes in Colombia in July 2014. It already has two dealerships, one in Bogotá and another in Medellin, and plans to open two more in the country.
“Colombia is a strategic market for Royal Enfield given the potential of its motorcycle industry and the fabulous riding terrain,” said Lal when his company entered the market. He added that “Royal Enfield brings to Colombia a new category of mid-sized motorcycles that will make leisure motorcycling more accessible and fun.”
As important as the company considers selling more motorcycles, targeting this leisure market is key. Its stores will hawk clothing and accessories to promote Royal Enfield as a lifestyle brand. This isn’t just a Colombian push, as the firm wants to become a global leader in the mid-size motorcycle segment at the same time it raises its standing among enthusiasts. Similar brand-expanding ventures are planned in London, Paris, and Madrid, but Royal Enfield’s targeted focus on an Andean nation whose population lacks the purchasing power of those in Europe’s capitals shows how lucrative the company thinks the Colombian market can be.
Growing domestic demand
Traditionally, the Colombian motorcycle market has been about transportation, not lifestyle, leisure, or luxury. Cheap motorcycles fill the streets in larger cities and rural villas, alike. They are low-cost options to get to work in a country where only 100 out of every 1,000 people own a vehicle of any sort, according to an April report from the bank BBVA. For comparison, more than 800 per 1,000 have an automobile in the United States. Economic differences between the two nations give little practical value to such a comparison, but even Argentina and Mexico have around three times as many vehicles per person as Colombia, while Brazil and Chile each have about twice as many.
Such data “shows the sector’s possibilities,” according to BBVA, and because many Colombian families still cannot afford a car, the motorcycle market continues to grow. Only 15% of households owned a motorcycle in 2008 compared to 23% in 2014.
Growth like this in a nation of nearly 50 million people makes for easy math, and many companies are seeing the lower-end motorcycle market as a great investment in Latin America’s third-most populous country.
India’s largest motorcycle company, Hero Motor Corp, invested $70 million into a factory last year in Cauca department’s Villa Rica. Sales have begun and its plans are aggressive: Hero Moto hopes to open 150 sales outlets and produce some 150,000 motorcycles per year in a country where 645,000 were sold in 2014. Some of these bikes will be assembled domestically and exported, but Hero Moto sees enough potential in Colombia that it reportedly tried to sign local football superstar James Rodriguez to an endorsement deal.
“Colombia is one of the top two-wheelers markets in South America and therefore, it is going to play a significant role as we continue to expand our footprint in the region,” said company CEO Pawan Munjal in a statement. “Going forward, we will aim at making Colombia a base for expanding our operations to neighboring countries in the region”
The nascent lifestyle market
Each year, Medellin hosts the nation’s largest bike conference, Feria de las 2 Ruedas, which celebrated its ninth anniversary this May with a three-day trade show that it says featured visitors from 30 countries. The gathering has become arguably the second-most-important motorcycle convention in Latin America, after Salão Duas Rodas in Brasil, and its popularity highlights the emerging biker scene that has drawn in Royal Enfield and others.
Becoming a lifestyle brand is well-worn territory for Harley Davidson. The U.S. company is synonymous with biker culture, and it too has been making inroads in Colombia, where per capita income has doubled, from $6,620 to $13,460, since 2000 and given rise to a middle class that now has the disposable income to buy toys.
Though the company generally markets its smaller, more-affordable motorcycles, not its $40,000 “hogs” in Latin America, the company says it sold more than 11,000 bikes in the region in 2013. This was a jump of 13% over the previous year, and although Mexico and Brasil are a larger focus, Harley Davidson has been encouraged by its growth in Colombia. The sales have been promising enough that it has put two dealerships in the nation compared to just one each in the other 16 countries in the region where it operates as of late 2014.
Selling in Colombia isn’t seamless even for Harley, however. One issue is altering its bikes to fit Colombia’s geography. “The changes that are made to the Harley Davidsons in Colombia are mountain-type gearboxes: longer gearboxes that can withstand the topology of the Andes,” said Cristiano Alvaros, commercial director of Harley Davidson for Colombia, in a conversation with Finance Colombia. He added that Harley Davidson also adjusts the suspension to deal with mountain terrain and the potholes prevalent throughout cities like Bogotá.
Ducati is another firm appealing to the premium buyer. The company knows its bikes are too expensive for Colombians who use motorcycles as cheap transport. “People don’t use it for work, really,” Ducati advisor Giorgio Matriales told Finance Colombia. “If you’re getting a motorcycle for work, you get another low-cc motorcycle. These motorcycles are wanted because they like to go about all over Colombia.”
But Matriales says Ducati is encouraged by its sales so far and believes that offerings like the mid-sized Scrambler have great potential. “The figures are rising at the moment, even though the motorcycles haven’t been in the market for long,” he said.
Making room on the roads
Colombia has nearly 50 million people, an emerging middle income segment, but a road system that the World Economic Forum recently ranked 126th out of 144 countries analyzed. There is a desperate need for more mobility, and motorcycles remain the best option for those cannot afford a car or want a nimble way to navigate the notoriously bad traffic in the nation’s capital.
Colombia is a also a country with beautiful terrain, from coastal deserts and jungle paths to Andean passes and palm forested roadways. More-affluent bike enthusiasts want top-end bikes to ride through all these landscapes.
AKT, an Envigado, Antioquia-based Colombian motorcycle company, has been treading on both sides of this line since it entered the market more than a decade ago. It offers motorcycles suited for various income levels and reportedly sold around 80,000 of them in 2011. It has street bikes and others designed for touring. Since its inception, getting started by importing motorcycles from China, it has sought to understand the nation’s nuanced market.
“We brought the Chinese motorcycles, and we ‘Colombianized’ them, to put it in a way,” AKT’s Santiago Montoya told Finance Colombia at the Feria de 2 Ruedas. “We adapted it to the Colombian market, to how the Colombian customer liked it, and that’s how we began with the work.“
The company has learned a lot in a decade of operating, but a few things are clear to AKT now: The Colombian consumer base is large, the market growing, and Colombians of all income levels want a little bit of everything. “The Colombian market is a demanding market that demands both design and quality in a product,” said Montoya. “The Colombian idiosyncrasy likes good things, pretty things.”