Demand boost: Hero Electric to turn profitable next year
MUMBAI: Naveen Munjal-led Hero Electric India Pvt Ltd, one of the early movers in electric twowheelers in India, expects to turn profitable next fiscal on the back of growing demand, particularly in markets outside big cities, a top company official said.
The New Delhi-based company had incurred heavy losses since its launch in 2010 in a market where electric vehicles had low acceptance because of high prices and concern over how far they could go on a single charge.
But with the government pushing for zero-emission technology and through its own efforts, Hero has seen sales of electric two-wheelers grow at a fast pace recently.
It sold 15,000 units in the first six months of the current fiscal— that’s equivalent of what it sold in all of last year. And some models have a waiting period of a monthand-a-half.
“All this while, we had been incurring heavy losses. We have reached a break-even point this year and hope to turn profitable next fiscal,” said Sohinder Gill, chief executive, global operations at the firm.
The maker of Photon, Optima, Maxi and Nyx e-bikes is now hoping to double its volume every year and reach the 100,000 mark by fiscal 2020 or 2021. Hero Electric’s “belly up strategy” of penetrating markets outside the main cities with its high-speed, lithium ion-powered scooters and motor- cycles has paid off, said Gill.
Beside launching models that offer better “value for money”, Hero is also working on premium vehicles that will only account for 5% of company’s volumes but demonstrate its technical capabilities, he said. Its current models can travel up to 25km on a single charge.
As part of its expansion plan, Hero will set up two new factories—one each in southern and western India—over the next two years and pump in ₹200 crore in investment. Hero’s existing plant in Ludhiana, which produces 50,000-60,000 units in two production shifts per year, is expected to run out of capacity by 2019, leaving Hero to build a new facility. Hero also plans to add 20 to 30 dealerships every year to its existing network of 280 exclusive dealerships. This is in addition to the sub-dealers it will appoint around the main ones to have a presence in all Talukas. “The EVs need proximity to the market and distribution,” said Gill.
A total of 23,000 electric twowheelers were sold in India in the fiscal year that ended on March 31, 2017—up from 18,000 a year ago—according to the Society of Manufacturer of Electric Vehicles (SMEV). It expects the current year to end with 36,000 units. The growth will be largely led by Hero Electric that accounts for six out of every 10 e-bikes sold in the country.
The government has set an ambitious plan for a mass shift to electric vehicles (EVs) by 2030. Sending a clear signal that India is firmly moving toward electric vehicles, the GST Council set a 12% tax rate for electric vehicles in May, compared with 28% plus cess for petrol and diesel cars and hybrid vehicles.