Hero MotoCorp charts new growth paths with "rejuvenated vision"

by Sumantra B Barooah 25 Jul 2020

It is imperative for a brand, or a company, to refresh or reinvent itself once in a while, to be in the game well enough. In today's rapidly changing world, the need and scale maybe more than what it was earlier. Hero MotoCorp's "rejuvenated vision" reflects that.

New mobility ideas, collaborations, digitalisation and new services are in the list of strategies for the Rs 33,650 crore major to grow sustainably in a disruptive era. Yes, there are new and revised strategies for two-wheelers too. "It's the right time to shift gears," said Pawan Munjal, chairman, Hero MotoCorp, at the Hero World 2020 — a first-of-its-kind three-day event for media, investors, Hero's dealers in the domestic market, supply chain partners and international distributors, held in Jaipur on February 18.

'Be the future of mobility', that's the current vision for Hero MotoCorp as it works on multiple strategies aimed at sustainable growth in an era of disruptions. Some of them could see the OEM venture into new areas of mobility, perhaps beyond motorcycles and scooters and, possibly, to services too.

To achieve its goals in the fast-changing and disruptive mobility industry, Hero MotoCorp could strike some new partnerships. "There could be multiple partnerships going forward for various different things," said Munjal. Among the new partners could also be a market rival, or two. "Friends and enemies are getting together. This is the era of partnerships, so anything is possible," remarked Munjal.

Not quite a rival, but premium motorcycle maker Harley-Davidson was reportedly in talks with Hero for a crop of midsize motorcycles, an emerging segment in India and overseas too. Hero's peers TVS Motor (with BMW Motorrad) and Bajaj Auto (KTM, Husqvarna, Triumph) have struck different kinds of partnerships to enter the premium motorcycle segment, while offering their partners an opportunity to play in segments, and markets, that offer much bigger volumes and thereby help them grow well.

To help it be in tune with the fast-changing times, Hero MotoCorp has reorganised its organisational structure to add a new unit called Emerging Mobility Business Unit. This unit is tasked with identifying new opportunities in the mobility space. In this quest, the company is working with start-ups — external and internal. A leadership team rejig was also done last week “with the objective of driving growth in the emerging business climate, and to create a bench-strength of future leaders”.

Quark 1, a concept that can be operated as a two- or three-wheeler, is one example of a project by an internal start-up at Hero MotoCorp’s engineering and R&D hub in Kukas, near Jaipur. Based on an 'Advanced Modular Scalable Electric Platform', Quark 1 is one of the multiple projects under HeroHatch, the company's incubation centre and indicative of the fact that the OEM's future mobility solutions may also have more than two wheels. An online marketplace for pre-owned two-wheelers that's currently undergoing market trials is another project by an internal start-up. Bangalore-based EV maker Ather Energy, in which Hero MotoCorp has hiked equity stake from 31.27 percent to 34.58 percent, with a fresh investment of Rs. 84 crore, is an example of the OEM partnering with an external start-up.

New big-ticket investment
Hero MotoCorp will invest "in the region of" Rs 10,000 crore on R&D, alternate mobility solutions, network expansion, brand-building across the globe, and more. Rajat Bhargava, Head - Strategy & Performance Transformation, Global Business & Emerging Mobility, Hero MotoCorp said, "There are also projects in the pipeline which are catering to the intersection of connected, electric and sharing." After the leadership team rejig Bhargava now has the role of Chief of Staff in the office of Chairman and CEO Pawan Munjal.

There could be collaboration for some of these too, with the goal of being a strong player in the mobility industry. “To capture the future of mobility, first of all there needs to be clarity on where do we want to participate, and who broadly is a friend or an enemy or who you want to collaborate with. Under that there are multiple initiatives, multiple ways in which you need to seed these things, and that's what will emerge, and finally adapt to the future of mobility or the emerging mobility," said Bhargava.

After a decade of successfully riding solo, after parting ways with Honda, the current decade will see Hero MotoCorp take a series of steps to 'be the future of mobility'. It will also see the OEM, which has increased its exports business to reach around 40 markets now, to take steps to what Munjal said as "find our rightful place in the global business".

"If we all meet together in 5-6-7 years, I think Hero would have gone a long step compared to what you see today," said Malo Le Masson, head – global product planning, Hero MotoCorp. Masson now has taken up the role of head of strategy for the OEM. And much of the change could be the result of collaboration, a strategy which is more of a norm than an exception today in the automotive industry, especially for electric mobility. Major OEMs like Ashok Leyland and Mahindra & Mahindra that Autocar Professional earlier spoke to, say there is a strong case for major OEMs to come together and leverage the benefit of collaboration in the forms of shared technology development costs and efforts, economy of scale. So, could any of Hero's collaborations be with another Indian OEM? As Munjal said, in this era of collaboration, "anything is possible".

Multi-pronged approach for electric mobility
"It's going to happen for sure, but it will take its own time," said Munjal about electric mobility. Unlike its Indian peers Bajaj Auto and TVS Motor, which entered the electric vehicle (EV) market at the beginning of the year with one scooter each, Hero doesn't have an EV in its portfolio yet. However, it plans to have a multi-pronged approach in the EV space, not only in India but overseas too. Though India is still at a nascent stage of the mass-scale electric mobility journey, there's a belief that it could be one of the leading EV markets globally. And that also gives a chance to OEMs in India to dream big.

Bhargava said, "I think the company which cracks (the EV market) and becomes a leader in EVs in India has a very sizeable shot of being an EV leader globally." "Especially Western markets because they are hungry for EVs," adds Munjal. A hint of Hero's ambition there? Hero's R&D setup near Munich may come handy for EVs too. It currently plays a support role to the R&D and engineering work at Hero's Centre of Innovation and Technology in Kukas, near Jaipur. "The idea of putting up an R&D centre in Germany is not only to service CIT here. It's also meant to service the Western markets," said Munjal, while talking about the growth prospects of Hero's global business.

Hero, being a hero in the mass-market game, wants to play the volume game with EVs too. "We are also keeping an eye on what would it take to create a product which will have a mass-market acceptance in India through an EV. And we are working towards that," said Bhargava. But Hero MotoCorp is in no "tearing hurry" to have a Hero-branded EV, said Munjal. He doesn't see big volumes yet for electric two-wheelers that cost around Rs 150,000 or 200,000. "We are a very large volume company. We need to do something which is meaningful for us," he said, while explaining the company's vision for electric mobility to a query from Autocar Professional. In a way, Hero's play in the domestic electric mobility market has already started albeit indirectly, through Ather Energy, which has been attracting attention with its advanced and edgy electric scooters — 450, 450X.

It is to be noted that Hero MotoCorp had first showcased its intention for electric mobility in 2012, with the Leap, a serial hybrid scooter. "There was no push by any government. There was no push by NITI Aayog. We knew that that's the direction the world is going to be heading in," said Munjal. However, things didn't go as planned and the project didn't see the light of day.  The Leap was intended to be sold in Western markets first. With a renewed focus, Hero takes a different approach to tap and have a serious play in the domestic and global EV markets. It's working on different areas — in the company, outside the company, and incubation too.

Though electrification of mobility is the future and there has been some push by policymakers, Munjal believes OEMs alone cannot change the landscape. There also has to be an evolution in the ecosystem — component industry, dealership community and "the most important" consumer.

Strengthening the core business

Hero MotoCorp launched new version of its 125cc Glamour bike

"We all know getting to the top is difficult, but staying on the top is very, very difficult," said Munjal, as he thanks his colleagues and stakeholders of Hero MotoCorp as the company completes a decade of riding solo by end-2020. Even as projects aimed for mass-scale electric mobility take shape, Hero MotoCorp takes steps to protect its turf. With a 'Rise, Revive, Race' mantra, the OEM has launched new versions of its 125cc Glamour bike and the bread-and-butter 110cc model Passion and also a new 160cc motorcycle under its Xtreme brand. While the new Glamour and Passion have the responsibility to build on already existing stories, some of which may have seen some erosion, the Xtreme 160R has a tougher challenge of playing in a new segment for Hero. This "belly" of the mainstream premium motorcycle segment has the biggest share of the pie, and is also extremely competitive. The Bajaj Pulsar 160NS and TVS Apache 160 4V are the lead players in this sub-segment. Hero believes it is well prepared to take on the competition with the Xtreme 160R, which claims a class-leading power-to-weight ratio.

With the Xtreme 160R, Hero now has five offerings in the 150-200cc segment. Incidentally, the CBZ, in 1999, from the Hero-Honda JV was this segment's creator. With the Xtreme and XPulse brands, Hero MotoCorp makes a fresh charge. "We are in some portion re-entering. Recently, I think we have shown success with the X-Pulse, as an overall franchise, doing very good. With the Xtreme 200S, we have gone slowly in terms of full might of marketing spends. So, we'll carry on more to the next year," said Malo Le Masson. With the new premium products launched, Hero plans to now revamp the showroom and buying experience for its customers, who usually are well aware about motorcycling.

Some of the new strategy blocks have been put in place, but with the global pandemic creating havoc  the growth challenge has got tougher. Before the Coronavirus outbreak Hero MotoCorp’s CFO Niranjan Gupta expected the growth to resume this quarter onwards, “or more safely H2 of the current financial year “because the accumulated demand also has a finite time period by which you can keep deferring, and some of the investments and actions of the government which it has outlined should start actually giving dividends and fruits." By then some of the new initiatives under the 'Be the Future of Mobility' may also see the light of day.

Scaling up engineering to ride better
Addressing the media at the Centre of Innovation and Technology, where Hero MotoCorp has invested $600 million (over Rs. 4, 448 crore) so far, Munjal highlights it as an evidence of his company's focus on building proprietary engineering and R&D capabilities. CIT, with around 1,000 engineers and automotive experts, is a big leap from a "very very small" R&D setup with a "few hundred" engineers in 2011. Over 150 projects, which include new products, variants and others, have been delivered from the hub so far. Hero MotoCorp, which recruited its 1,000th woman employee last year, said it is also working on developing internal talent to avoid getting lateral talent. The CIT has people of over 10 nationalities "engaged in designing, developing, and coming up with mobility solutions for the future". At least some of these solutions would be crucial for the world's largest two-wheeler manufacturer to stay the course in the fast changing, disruptive, and even uncertain times.

(This story was first featured in Autocar Professional's March 1, 2020 Issue. After the management rejig on July 21, 2020, it was tweaked with current inputs.)

Hero MotoCorp rejigs leadership team to ride disruptive future

Malo Le Masson: ‘We will have to look at two-wheelers, and beyond.’

Ather Energy gets fresh funding of Rs 84 crore more from Hero MotoCorp

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