Royal Enfield, the Indian maker of classic-style motorcycles, is concerned about an increase in prices after Thai authorities upgraded the emissions standards for motorcycles, effective later this year.
The government plans to increase the emissions standards for locally assembled and imported motorcycles from Euro 3 to Euro 4 in late 2019.
In early 2020, each motorcycle will be subject to a new calculation for excise taxes, with the basis shifting from engine size to CO2 emissions.
Electric and fuel-based motorcycles releasing emissions of less than 10 grammes per kilometre will be taxed at 1%.
Fuel-based or hybrid motorcycles with CO2 emissions of 10-50 g/km will be taxed at 3%, 51-90g/km at 5%, 91-130g/km at 9% and more than 130g/km at 18%.
Compared with the existing structure, the new tax rate will increase by 0.5-1% in every segment to be passed on to the retail price tag.
Vimal Sumbly, head of business for Asia-Pacific, said Royal Enfield is similar to other global brands and has to follow every country's emissions norms, set by the government.
Royal Enfield has its production facilities in India, so the two-wheeler industry is moving from BS (Bharat Stage) IV to BS VI.
BS IV is equivalent to Euro 4, while BS VI is meant to emulate Euro 6. The Indian government skipped BS V or Euro 5.
Delhi and the capital region are mandated for BS VI in April 2018 and 2019, respectively. Nationwide enforcement of BS VI will begin in April 2020.
"Bharat Stage is also the most stringent emissions norm in the world, and it keeps Royal Enfield distinctly ahead of the rest in terms of preparedness," Mr Sumbly said. "Any changes in the emissions norm will definitely impact future pricing, but Royal Enfield cannot speculate on that matter yet, as we expect to announce new prices in due time."
Separately, Royal Enfield posted 1,200 deliveries in the Thai market for the first half, an increase of 42% year-on-year.
"The sales for the period were largely from the 'Twins', the 650cc Interceptor and the Continental GT, which received overwhelming responses from bikers," Mr Sumbly said.
He expects to double 2019 sales, exceeding 3,000 motorcycles, with new product launches and rapid footprint expansion of dealers and service networks across Thailand to make the brand more accessible.
Royal Enfield is emphasising the mid-size motorcycle market of 250-750cc.
"This segment in Thailand grew by 13% in the first six months of 2019, while the overall two-wheeler industry saw a drop of 1.5% for the period," Mr Sumbly said.
Royal Enfield entered Thailand in late 2015 and appointed General Auto Supply Co as its first Thai distributor.
The brand sold 1,039 motorcycles here in 2016, followed by 1,133 in 2017 and 1,527 in 2018, according to the Land Transport Department.
The company plans to assemble bikes in Chachoengsao province under a contract with local vehicle assembler United Auto to operate the factory at Gateway City Industrial Estate.
Operations are scheduled to begin later this year, with an initial assembling capacity of 1,200 units a year.
