Hero Moto Proves It’s a Hero

Co sur­passed cu­mu­la­tive sales of erst­while JV Hero Honda within 6 years of com­menc­ing its solo jour­ney, dur­ing which time its share price dou­bled. It has also main­tained lead­er­ship in In­dia

The Economic Times - - Brands: Creating Desire - Sharmistha.Mukher­jee @times­group.com

New Delhi: Pawan Mun­jal-led Hero Mo­to­Corp has taken six years to eclipse the cu­mu­la­tive sales of the pre­vi­ous three decades when Honda part­nered the lo­cal com­pany to build one of the most durable cross-bor­der joint ven­tures. Hero’s suc­cess as a solo rider is a story of In­dia’s jour­ney into con­sump­tion adult­hood — and a vote of con­fi­dence for home­grown tal­ent in con­sumer tech­nol­ogy.

Hero Mo­to­Corp sold a total of 38.9 mil­lion units un­til the end of July 2017, over­tak­ing the cu­mu­la­tive sales of 37.4 mil­lion two-wheel­ers regis­tered by Hero Honda in its 27 years. Notably, in th­ese six years, the share price of Hero Mo­to­Corp has also dou­bled, with the mar­ket cap rac­ing past 77,000 crore.

The over­all two-wheeler mar­ket has in­creased by over 31% to add more than 4.2 mil­lion units in this pe­riod (FY12-FY17). Total two-wheeler sales in the do­mes­tic mar­ket stood at17,589,511units at the end of the last fi­nan­cial year. Hero Mo­to­Corp had a share of 36.9%, and its near­est com­peti­tor and erst­while part­ner Honda Mo­tor­cy­cle & Scooter In­dia (HMSI) 26.9%.

“In 2011, we went against the con­ven­tional wis­dom and took the bold step of walk­ing out of an es­tab­lished joint ven­ture. We had the con­fi­dence in our in­her­ent ca­pa­bil­i­ties and our per­for­mance has vin­di­cated our be­lief… The jour­ney of Hero in th­ese past six years re­flects the story of the tech­nol­ogy-driven new In­dia, its youth and their global as­pi­ra­tions.,” Pawan Mun­jal, chair­man of Hero Mo­to­Corp told ET. Srid­har V, Part­ner, Grant Thorn­ton In­dia, said: “The mar­ket for two-wheel­ers has ex­panded at a rapid pace over the last decade with cov­er­age of the ur­ban, semi ur­ban and ru­ral mar­kets. It is not sur­pris­ing that com­pa­nies have been able to grow and sus­tain vol­umes…by meeting cus­tomer ex­pec­ta­tion and through qual­ity.”

Hero Group un­veiled the new identity of the solo brand Hero Mo­to­Corp — af­ter its sep­a­ra­tion from Honda Mo­tor Co of Ja­pan — on Au­gust 9, 2011. Crit­ics had, at MAR­KET SHARE Total % in mar­ket share Hero Mo­to­Corp

In 2011, we went against the con­ven­tional wis­dom and took the bold step of walk­ing out of an es­tab­lished joint ven­ture. We had the con­fi­dence in our in­her­ent ca­pa­bil­i­ties and our per­for­mance has vin­di­cated our be­lief

that time, raised concerns about Hero’s fu­ture as the com­pany relied on Honda for prod­uct tech­nol­ogy. Not many ex­pected Hero to sus­tain mar­ket lead­er­ship af­ter the sep­a­ra­tion. Not many ex­pected Hero to sus­tain mar­ket lead­er­ship post the sep­a­ra­tion from its Ja­panese part­ner To be sure, Honda has since nar­rowed the lead, but Hero has man­aged to main­tain its pole po­si­tion in the do­mes­tic mar­ket. In the last fi­nan­cial year, HMSI’s vol­umes grew by 10.30% to 4.73 mil­lion units, 1.75 mil­lion units be­hind Hero Mo­to­Corp, whose sales re­mained largely flat at 6.48 mil­lion units.

Hero’s new prod­ucts, de­vel­oped with its own tech­nol­ogy, have helped the com­pany main­tain over 50% share of the do­mes­tic mo­tor­cy­cle mar­ket. Its main­stay re­mains the Splen­dor, which with sales of 2,550,830 units con­trib­uted nearly 40% to over­all sales of the com­pany last fis­cal.

The chal­lenge for the com­pany lies in corner­ing a larger pie in the coun­try’s fast-grow­ing scooter seg­ment where for­mer part­ner Honda con­trols as much as 60% of the mar­ket com­pared to Hero’s 12.7%. V G Ra­makr­is­han, man­ag­ing part­ner at Avan­teum Ad­vi­sors, said: “Honda has been grow­ing faster than the mar­ket and gain­ing share. Be­sides, with in­creased em­pha­sis on elec­tri­fi­ca­tion in au­to­mo­tive space, it will be­come all the more cru­cial for Hero to have a good pres­ence in the scoot­ers seg­ment.”

In­tro­duc­tion of the au­to­matic trans­mis­sion in scoot­ers, ris­ing ur­ban­i­sa­tion, and fe­male con­sumers have driven the share of scoot­ers in the coun­try’s over­all two-wheeler mar­ket to 33% last fis­cal from 21% in FY13. In th­ese same five years, the share of com­muter mo­tor­cy­cles (100-110 cc) has de­clined to 37% from the ear­lier 47%. To strengthen its foot­print in the seg­ment, Hero has lined up new scooter mod­els for launch over the next few quar­ters.

Be­sides, con­sol­i­dat­ing its pres­ence in the do­mes­tic mar­ket Hero Mo­to­Corp has also ex­panded its pres­ence to 35 coun­tries across Asia, Africa and South & Cen­tral Amer­ica in the last six years. The com­pany has in­vested heav­ily in ramp­ing up its in-house R&D ca­pa­bil­i­ties and set up the Cen­tre of In­no­va­tion and Tech­nol­ogy (CIT) in Jaipur.

“We are not go­ing to rest on our lau­rels. We will con­tinue to set new bench­marks in de­vel­op­ing new tech­nolo­gies for the fu­ture of mo­bil­ity and we will also con­tinue to keep ex­pand­ing our global foot­print,” Mun­jal added.

On the ca­pac­ity front, Hero is well placed. Hero Mo­to­Corp cur­rently has an in­stalled do­mes­tic ca­pac­ity of around 8.9 mil­lion units, which will go up to 10 mil­lion once its plants in Gu­jarat and Andhra Pradesh be­come fully op­er­a­tional. Its clos­est com­peti­tor HMSI has a ca­pac­ity of 6.4 mil­lion units across its four man­u­fac­tur­ing fa­cil­i­ties in Haryana, Ra­jasthan, Gu­jarat and Kar­nataka.

60,42,902 59,12,538 61,15,197 64,31,686 64,21,913 64,83,655 HMSI 19,96,294 26,06,841 35,58,401 42,63,967 42,83,690 47,25,067

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