Eicher Motors Ltd has earmarked around ₹2,200 crore in capital expenditure for its Royal Enfield business in FY27 towards capacity expansion, new product development and electric vehicle programmes, as the company prepares for its next growth phase amid strong premium motorcycle demand and emerging supply-chain challenges linked to the West Asia crisis.

Royal Enfield remained the company’s key growth driver in FY26, crossing annual sales of one million motorcycles for the second consecutive year. The company sold more than 12.27 lakh motorcycles during the year, with domestic sales rising 23% and international volumes growing 30%.

“The capex at Royal Enfield level is about ₹2,200 crore. Of which capacity expansion is around ₹1,000 crore. Remaining investments are towards new product development and electric vehicle development,” B. Govindarajan, Managing Director - Eicher Motors Ltd and Chief Executive Officer - Royal Enfield, told reporters during the company’s Q4 FY26 earnings call.

Production hampered for almost 10 days

Eicher Motors said the ongoing West Asia crisis has started impacting parts of the automotive supply chain through higher commodity prices, logistics disruptions and shortages of industrial gases.

“The supply chain currently has a headwind because of that,” Govindarajan said. “Production was hampered for almost about 10 days because of availability issues, but normalcy has been getting restored over the last few days.”

According to the company, inflationary pressures have increased costs by nearly 3-3.5%, prompting calibrated price hikes across both Royal Enfield and VE Commercial Vehicles.

“We have taken a strategic price offset of around 1.75% at Royal Enfield,” Govindarajan said, adding that the company had accelerated value-engineering and cost-reduction measures to offset rising input costs.

Management also said it was reviewing discretionary spending and reducing non-essential travel through greater use of digital communication tools.

Record earnings support expansion plans

Eicher Motors closed FY26 with its strongest-ever financial performance, driven by sustained momentum in Royal Enfield motorcycles and robust growth in its commercial vehicle business. The company reported a 12% year-on-year rise in consolidated net profit for the March quarter at ₹1,520 crore, while quarterly revenue climbed 16% to ₹6,080 crore.

EBITDA rose 20% year-on-year to ₹1,514 crore in Q4 FY26, with EBITDA margin improving to 24.9% from 24% a year earlier. For the full year, consolidated revenue rose 24% to ₹23,408 crore, while profit after tax increased 17% to ₹5,515 crore. The board has recommended a final dividend of ₹82 per share for FY26.

Capacity expansion gathers pace

Despite near-term supply disruptions, Eicher Motors said demand for premium motorcycles continues to remain healthy.

“In April, we sold around 1.04 lakh motorcycles, which was about 37% growth over last year,” Govindarajan said. “Our enquiry growth is around 23-24%. Structurally, demand is continuing.”

Earlier this year, Eicher Motors approved a ₹958 crore brownfield expansion at its Cheyyar facility in Tamil Nadu, which will increase annual production capacity to nearly 20 lakh motorcycles by FY28 from around 14.6 lakh units currently.

Govindarajan said an additional production module raising annual installed capacity to nearly 16 lakh units is expected to become operational from July this year.

The company has also signed an agreement with the Andhra Pradesh government to establish a new manufacturing facility near Tirupati as part of its long-term expansion strategy.

“We have to de-risk from concentration at one place while continuing to leverage the supplier ecosystem in Tamil Nadu,” Govindarajan said.