Hero MotoCorp: Hero MotoCorp sees 26% jump in festive rural sales


This festive season was a clear testimony that rural markets are back on the growth track, according to Niranjan Gupta, chief executive officer of Hero MotoCorp, the country’s largest two-wheeler maker that clocks more than half of its sales from rural markets.

“Our secondary network, which is primarily based in tier II and III cities and rural areas witnessed a 26% growth” during the 42-day festive period that ended with Bhai Dooj on November 15, Gupta told ET.

Overall, the company posted about 20% year-on-year jump in sales at a record 1.4 million units in the festive season as positive sentiments continued to prevail in key urban centres, he said.

“We also saw a 10-fold increase in ecommerce sales and our retail finance penetration was highest at 68%,” Gupta said.

Sales of motorcycles, scooters and mopeds in the local market increased by 6.6% on year to 10.64 million units between April and October as per data available with industry body Society of Indian Automobile Manufacturers (Siam).

The industry is expected to clock sales of about 18 million units in the domestic market this financial year, well short of the pre-pandemic peak of 21.18 million units last reported in FY19. However, the positive demand momentum across markets is expected to continue and help the industry recoup lost volumes in the next two years, industry insiders said.Industry estimates two-wheeler retail sales in the country went up by 20% on year to nearly 3 million units between Navratri and Bhai Dooj.Robust festive retail sales have helped Hero MotoCorp bring down channel inventory to its lowest level in more than three years, Gupta said.

“This sets us on a steady growth path for the rest of the fiscal year,” he said. “We expect the positive trend to continue with the upcoming marriage season and a good harvest owing to normal monsoons.”

The turnaround in two-wheelers sales, coupled with the company’s premiumisation drive, has helped the stock of Hero MotoCorp outperform the Nifty50 Index by 22% in the past six months, after underperforming by 37% the past three years, to hit a five-year high of Rs 3,627.50 on Tuesday.

Gupta said most of the economic indicators are trending in a positive direction. “Now rural also is bouncing back as seen through the festive season. The huge capex spending done by the government will start paying rich dividends as we move forward,” he said.

On its part, Gupta said Hero will continue to work on expanding its core entry motorcycle segment going forward while product interventions will continue at the more premium end of the market.

“India is a story of many Indias and while the bottom of the pyramid is slowly coming back to consumption and spending, the middle class/upper middle class is spending like never before,” he said, adding this has helped the premium segment grow at more than 20% per annum recently.

In addition to the Hero badged bike on the 440cc platform co-developed with Harley Davidson, two brand new large-wheel scooters, the Xoom 125 and Xoom 160, will hit roads shortly.

On cards also is a new model in the 125cc segment and electric vehicles in the mid and affordable segment, Gupta said.

“Our strategy for growth is tailored specifically to customer segments, our role, and our targets,” he said.

In the 100/110 cc segment, where the company dominates the market with a share of around 70% with motorcycles like Splendor, measures are being taken to grow the pie. “We will focus on getting more households into mobility, while upgrading them to better products,” Gupta said. “We are going micro here, looking at household penetration at not just the state but district/ town level and aligning our offerings, sales, marketing, and financing plans accordingly.”

In the 125cc segment, while the focus is to regain market share with models like Super Splendor Xtec and Glamour Xtec, work is simultaneously on to build a full portfolio of products across various categories at the more premium end of the market (150cc+).

“We have done a spate of launches this year and with more to follow, it will bolster our play in this segment,” Gupta said. “The brand association with Harley-Davidson, launch of Premia stores (which exclusively retail premium two-wheelers), existing store facelifts, and focus on digital customer journey bring a holistic approach to winning in this segment.”

In early signs of success, Hero MotoCorp has received strong customer response to Harley XD440 (25,000 bookings) and Karizma (13,000 bookings) launched earlier this fiscal. The company is in the process of ramping up production to reduce waiting on these products.

“The order book is healthy and as we ramp up supplies, the retail numbers will go up too,” Gupta said. “Currently, we are delighted to be running with a 4-5 month order book. I expect that with supplies ramping up, we will be at a capacity of 10,000 units per month in the upper premium segment by the end of the fiscal year.”

The company is also revamping its existing stores to ‘Hero 2.0’ format to give a more premium experience to customers. The ‘Hero 2.0’ store count has reached 200 and is expected to close at 500 by the end of the fiscal.

International business is also likely to become an engine of growth for the company going ahead. “We will prioritise top-10 (international) markets for rapid scale up, by putting resources disproportionately. At the same time, we will nurture and build the rest of the markets efficiently, while new market entries will be based on the size of the prize and other strategic considerations,” Gupta said. “We believe that we are at the right juncture where international business can become a growth engine for Hero.”

Hero MotoCorp currently is present in over 47 countries.

Leave a Reply

Your email address will not be published. Required fields are marked *