€50 million investment in Stark Future by Royal Enfield parent company

[Number Six]

€50 million investment in Stark Future by Royal Enfield parent company

So the obvious question ; why ? Why would Stark Future need or want an investment from Eicher, LTD ?
Stark appears to be fully capitalized & has approx 204 million in pre-orders on it's books & what appears to be a functioning factory in Spain.
Most of the work would seem to be done. Unless maybe they're seriously underwater as a result of those efforts.

" .. While they are scaling up and planning their market entry soon, we will support Stark in the industrialisation process .. " - B Govindarajan, CEO of the company

A definition of ; ' support the industrialization process' would be relevant & useful.

These the current Royal Enfield products ;



On the surface, it would appear Royal Enfield is the polar opposite to what Stark Future represents.
Royal Enfield seems to be all about Indian made re-hashed classic motorcycles at a comparatively low price.
Stark Future on the other hand ... completely new & for the most part using the very best of componentry.

Curious as to the primary reason these two organizations would choose to get in bed together. ( especially Stark Future )
Recall Alta as having a rather bad experience getting involved with outside companies.
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[bluefxstc]

Most entrepreneurs are good at developing and building a business, but not a running a business. This could be a way for the founders of Stark to exit, or partially exit, the business. Basically, get some money or they may want some additional funds to expand. May also give access to the Royal Enfield dealer and distribution network.

 

[Rashid510]

Curious as to the primary reason these two organizations would choose to get in bed together. ( especially Stark Future )
Recall Alta as having a rather bad experience getting involved with outside companies.

RE basically allows Stark to rapidly manufacture potentially there EV products. It also gives them more clout when dealing with suppliers (RE is the biggest name in motorcycles) also RE has a really strong following in the Southeast Asia/Indian market.

 

[Philip]

" .. While they are scaling up and planning their market entry soon, we will support Stark in the industrialisation process .. " - B Govindarajan, CEO of the company

A definition of ; ' support the industrialization process' would be relevant & useful.

Perhaps Stark wanted a few Indian industrial engineers at their brand-new factory. Someone who could then travel to India and replicate that factory there.

 

[Number Six]

Suppose the Swedish designed / engineered & manufactured in Spain could be mostly a proof-of-concept of the whole process to a degree.
Guessing that the bigger picture is one of new & varied models, lowered production costs & higher volumes produced via an Indian manufacturing relationship.

However, for those of us who's interest lies solely on the Varg MX bike & not so much on unit costs, global growth & sales volumes, I'd ask this ;
If positioning for cost reductions are going to be a focus before any bikes have even been delivered - how long until the KYB suspension & Brembo brakes get replaced with lesser components ?
KTM's came with Ohlins shocks in the mid-nineties, then they bought WP .. & that gave birth to an entire industry of suspension tuning shops world wide.
Metallurgy sourced in India could also give one pause perhaps when approaching that big triple.

It's all conjecture currently to be sure, but it would be interesting to understand the reasoning & intentions beyond the vagaries of the recent press release.

Note ; the markets liked the news - EICHERMOT (NSE) up 2.38% today. So there's that.
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[happyinmotion]

I work in tech venture capital. This deal makes sense to me.

Stark wants to go big and mx is small. Like tiny. We're raving about Stark having 17,000 orders. Royal Enfield sell about a million bikes a year.

Stark has to go big. That means road bikes and taking market share from existing manufacturers.

A partnership with Royal Enfield gets Stark scale, 50x manufacturing capacity, a global network, and entry into the biggest motorbike markets in India & SE Asia. A partnership with Stark gets Royal Enfield world-leading clean technology at a time when regulation is going to push their petrol engines out of the market.

Stark aren't short on cash. With $200m orders, they can get a bank loan to finish the factory build. This deal is about the future, once they've spent 2023 delivering the first dirt bikes.

 

[Philip]

The guys at KTM and at the Big 4 Japanese manufacturers must be scratching their heads much harder than we are, LOL!

 

[happyinmotion]

And Royal Enfield announced last month that they're working on electric bikes. Release is planned for 2025, so that fits with them making use of Stark tech.

 

[Bloak]

And Royal Enfield announced last month that they're working on electric bikes. Release is planned for 2025, so that fits with them making use of Stark tech.

Hopefully they don't use a page from Harley Davidson playbook.....

 

[Number Six]

The guys at KTM and at the Big 4 Japanese manufacturers must be scratching their heads much harder than we are, LOL!

They'd do well to quit scratching & get moving on viable e-machines & soon, or they'll end up 2nd tier in the publics mind.
When you ask someone about who makes electric cars, the answer you'll get isn't chevy bolt or Ford Escape-e.

It's Tesla.
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[happyinmotion]

Hopefully they don't use a page from Harley Davidson playbook.....

Hopefully not, but I think Stark is a different situation to Alta.

Alta needed cash or they would die. They had an ok bike with ok sales and needed substantial funding for the next generation bike. Harley hooked them on that with the promise of cash, then dropped them. Alta couldn't pay the bills and they died.

Stark don't need cash. They have a $200m order book as security on any loans to finish building the factory and get the bikes out the door. In 2023 they'll have substantial revenue coming in. Then it won't cost them much up-front to do an enduro model for more orders and more revenue.

Then they'll need more investment while they design the road models, but that's an issue for 2024. I don't know how many total sales Alta ever achieved, but I'm guessing less than 2000? By 2024, Stark will have sold well over ten times that number, which makes for a much more viable company.

 

[Matt]

When I saw the demo bikes the sales rep said that stark already had several road bikes designed and in testing some much farther along than anyone publicly seemed to realize and that the road market was a huge part of the plan for stark. Big picture one of starks drivers is improving the environmental impact of the motorcycle industry with the largest room for change in the on road market. Also there is a full supermoto version of the Varg already designed and tested and likely will be a part of the early selection of bikes that Stark offers. My guess is that a good part of the joint venture is to help position themselves to enter the road market.

 

[Dirt-E]

I don't think road bikes are going to be viable for quite some time. Think about it, if you can't get more than 100-150 miles out of a charge, that's not a lot of driving unless you're bound to 35mph in city-scape. The only thing that will get them there is new battery tech and that's not a fast moving goal post. E-bikes are still going to be toys and curiosities for a long time. Stuff like Alta and Stark are just the kick-off to show it works, but it will only be viable in a niche area where you are likely minutes away from a charge point, not hours like on a gas bike.

So, more on topic, RE probably has the ability to help with the economy of scale, so that's understandable. I think Harley just wanted to edge out the competition and delay the inevitable. That or they wanted to see where they could place their products in the future and realized pretty quick that it will still be a long time before a "real" electric motorcycle will be possible. By that, I mean 200-300 mile range and not weigh half a ton.

 

[Chadx]

I don't think road bikes are going to be viable for quite some time. Think about it, if you can't get more than 100-150 miles out of a charge, that's not a lot of driving unless you're bound to 35mph in city-scape.

Sounds like you are coming at this from a USA perspective and not a global perspective where small motorcycles are the primary local transportation. Current electric motorcycle power and range are more than adequate to fill millions upon millions of the worlds motorcycle use cases. In north america, we tend to think about long road trips or long offroad rides when we think about motorcycling. And that also tends to be purely recreational riding. I submit that much of the rest of the world, and the primary target motorcycle buyers in the world if you are strictly talking about sales volume, are using motorcycles that are small displacement, short range tools for local transportation and those are often their only form of transportation; not recreational.

 

[rayivers]

Sounds like you are coming at this from a USA perspective and not a global perspective where small motorcycles are the primary local transportation. Current electric motorcycle power and range are more than adequate to fill millions upon millions of the worlds motorcycle use cases. In north america, we tend to think about long road trips or long offroad rides when we think about motorcycling. And that also tends to be purely recreational riding. I submit that much of the rest of the world, and the primary target motorcycle buyers in the world if you are strictly talking about sales volume, are using motorcycles that are small displacement, short range tools for local transportation and those are often their only form of transportation; not recreational.

+1. And Zero sold @ 3.5K street-only or dual-purpose electric bikes in 2020 & were on track to sell @ 4.5K in 2022; apparently many considered them viable enough.

 

[bluefxstc]

The average US driver, only drives 35-40 miles per day. Motorcycles may do longer drives on the occasional weekend, but I bet 100 mile range would be more than enough for a large percentage of the rides. Before I retired I drove my Alta EX to work every day it wasn't raining or too cold, and its range was more than enough. 100 miles would be 2-3 days of commuting without charging. Additionally, most motorcyclist I know have more than on bike so a shorter range bike may fit perfectly into the stable. Use the electric around town and on the occasion when you do a longer ride take the Honda, Triumph, KTM...

 

[Philip]

Even moving "south of the border", scooters and mopeds is what most people use to get around town. Most have electric start and CVT belt drives. Lots and lots of them on the streets. Local men, women, children, and elderly, all on scooters, many riding 2-up or 3-up, some even 4-up. Sandals is the typical footwear. Some helmets are used. Speeds over 60 km/h (40 mph) are considered fast. None of these travel farther than 40 km in one day, unless it is some quick pizza delivery guy who rides all day long.

Bigger bikes and sedans are used only if you commute to work in another town.

The only leisure motorcycle riders are gringos and some native adventurous big city dwellers, all almost invariably on BMW GS bikes.

 

[Dirt-E]

Correct, this is namely aimed at NA where the majority of trips are longer range than most other countries (or at least that's my perception of it). If you have short range, low speed scenarios, then electric makes sense, but you get some severe range anxiety on an electric. I rode my EXR into DC one day from Fairfax and was just about pushing it on foot for the last couple of miles because the range never lived up to the claimed distances. If I could've had a public charge option that would've negated the issue altogether, but that infrastructure just isn't there yet, which is where my assumptions of viability come from.

Also, hit the trails on it and the range is even less, so in a hilly, twisty road situation in the city and your perceived range can drop a bit. That means you're either lugging the charger around with you or it'll need to be built in (so either slow, or more weight, etc).

The other tradeoff is to give up performance and speed and/or weight (if possible), which is what Zero did with their bikes (aka boring). Alta was aiming to get great acceleration and power (which is what Stark seems to be doing as well) since that is what will get people excited about buying them.

 

[Chadx]

I submit that a reasonable measurement, of how motorcycles/scooters are used in the world, is by time-in-seat each day/commute rather than miles driven by that user. I agree that rural areas, in any part of the world, would require longer range and higher speed commutes which may or may not work with current electric offerings. But those users are a very small percentage of users compared to more congested metro areas and metro area users would have as much time-in-seat for their daily use as rural riders/commuters; the difference is the speed they travel and distance they travel in that amount of time.

Regarding the numbers of metro vs rural, it may put things in perspective if one looks at some city vs rural numbers:

Top 10 largest US Metro areas:
1 New York-Newark-Jersey City, NY-NJ-CT-PA MSA - 19,768,458
2 Los Angeles-Long Beach-Anaheim, CA MSA - 12,997,353
3 Chicago-Naperville-Elgin, IL-IN-WI MSA - 9,509,934
4 Dallas-Fort Worth-Arlington, TX MSA - 7,759,615
5 Houston-The Woodlands-Sugar Land, TX MSA - 7,206,841
6 Washington-Arlington-Alexandria, DC-VA-MD-WV MSA - 6,356,434
7 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA - 6,228,601
8 Atlanta-Sandy Springs-Alpharetta, GA MSA 6,144,050 - 6,089,815
9 Miami-Fort Lauderdale-Pompano Beach, FL MSA - 6,091,747
10 Phoenix-Mesa-Chandler, AZ MSA - 4,946,145

There are 56 metro areas in the USA with population over 1 million.

Lowest State populations:

1. Wyoming (Population: 581,075)
2. Vermont (Population: 623,251)
3. District of Columbia (Population: 714,153)
4. Alaska (Population: 724,357)
5. North Dakota (Population: 770,026)
6. South Dakota (Population: 896,581)
7. Delaware (Population: 990,334)
8. Rhode Island (Population: 1,061,509)
9. Montana (Population: 1,085,004)
10. Maine (Population: 1,354,522)

I'm in Montana and there are 51 USA metro areas with a population greater than my entire State. And even living in a rather rural State, the daily work commute for a large percentage of Montana residents, is within the small cities/towns so still small ranges. I'm outside a town of less than 50,000 and my work commute is 12 miles round trip. When I lived way outside of a town of 30,000, my work commute was 28 mile round trip. Both well within current electric transportation ranges.

World largest cities by population (these are the cities themselves, not the metro areas)?

1. Tokyo, Japan - 37,435,191 people
2. Delhi, India - 29,399,141 people
3. Shanghai, China - 26,317,104 people
4. São Paulo, Brazil - 21,846,507 people
5. Mexico City, Mexico - 21,671,908 people
6. Cairo, Egypt - 20,484,965 people
7. Dhaka, Bangladesh - 20,283,552 people
8. Mumbai, India - 20,185,064 people
9. Beijing, China - 20,035,455 people
10. Osaka, Japan - 19,222,665 people

All this to say, there are vast populations that use bicycles, ebikes, scooters, small motorcycles for day-to-day transportation and electric scooters/motorcycle performance and range easily satisfy the commuting needs of those users compared to rural recreational riders. And that market is stunningly large compared to the recreational rider market. Royal Enfield, and many other global manufacturers, cater to this audience and EV is a completely workable solution for those users.

Regarding range anxiety, whether using ICE or EV, one only gets range anxiety if you are pushing up against the limit of your range. If you are riding well within that range; no anxiety. Ability to quickly fill a gas tank vs charging electric is a consideration only if you are bumping up against max range. If I'm in my pickup and have 3/4 tank of gas and am commuting my 12 mile round trip to work, no anxiety. If I'm in in the mountains on a forest service road and my gas gauge is on E and my gas light comes on, then anxiety. If your electric scooter/motorcycle has a range of 40 miles and your daily commute is 10 miles; no range anxiety.

Stark has already said they intend to design and expand into to other EV motorcycle categories. Besides their internal projects, I suspect they are positioning themselves to also work with Royal Enfield for them to use some Stark tech for their current designs/chassis or new/future designs (like Polaris did with Zero motorcycle). And possibly Royal Enfield would take on some manufacturing in the future, even if that is only for the parts used within Royal Enfield bikes and not Stark bikes. All speculation and we'll likely never know the root cause of the investment. We can only wait and see what comes of it.

 

[happyinmotion]

Let's remember just how different the US motorbike market is to the rest of the world.

Harley Davidson gets lots of media and cultural attention. They sell 200,000 bikes per year, two-thirds of those are in the US.

Royal Enfield? 1 million per year, all 650cc or less
Bajaj? 6 million per year, all 400cc or less
Hero? 8 million per year, all 200cc or less
Honda? 17 million per year

Sure, Honda sell the Fireblade. How many? They don't say. Honda does say how many Super Cub's they have sold - more than 100 million.

And that's without even mentioning huge Chinese domestic manufacturers like Jinan Qingqi or Lifan.

That's the global market. Big bikes are only a small part of this. Dirt bikes are an even smaller part.

It's a market ready for electric to take over. Hence Stark's deal with Royal Enfield.