Hero MotoCorp, India’s largest two-wheeler manufacturer, has earmarked investments worth Rs 2,500 crore for capital expenditure over the next two years (FY2018 and FY2019).

The proposed amount will include expenditure made on capacity expansion (including the Gujarat, Andhra Pradesh and Bangladesh facilities), research and development, new products, modernisation and digitisation and several other heads, senior company officials told market analysts earlier today.

The company, which reported a share of 36.86 percent in the overall domestic two-wheeler market for FY2016-17, also plans to roll out close to half-a-dozen products including new models and refreshes during this financial year to boost up its sales. Autocar Professional understands that the product lineup for FY2018 includes a single-cylinder, 200cc motorcycle and a single-cylinder, 125cc scooter models, both scheduled to be launched later this year.

Both the all-new products – 200cc premium motorcycle and 125cc scooter – will mark Hero MotoCorp’s foray into the respective categories in FY2018.

Regaining Passion
The company is also looking to bolster the declining sales of its Passion brand of commuter motorcycles. The Passion brand stood as the fifth largest selling two-wheeler brand in India during FY2017, and the third among the largest selling motorcycles.

It sold 870,382 units in the last fiscal, down by 23.62 percent YoY. Hero MotoCorp had sold 1,341,424 units and 1,139,576 units of Passion motorcycles in FY2014-15 and FY2015-16 respectively.

Until FY2014-15, the Passion used to be the second largest selling motorcycle in India. While it is commendable that the brand continues to stand out amongst the industry’s top performers despite the absence of the addition of even a single new model in the past five or more years, the Passion brand’s future growth, however, depends on how Hero MotoCorp works on the future of this ageing mass commuter motorcycle brand.

In this context, the company is now learnt to be readying a new strategy that will include a number of new activities, possibly including new-refreshed models in FY2018.

“The company management is working around the Passion umbrella as they look to drive sales via several new activities late this year. They have refused to divulge anymore details on this front,” revealed another source.

Gunning for growth in scooters
Having lost the tag of being the second largest scooter company in India to TVS Motor Company in FY2017, Hero MotoCorp is now aggressively working to boost its depleting market share in the fast-growing domestic scooter market.

File photograph of Pawan Munjal, chairman, MD and CEO, Hero MotoCorp, with the Duet and Maestro scooters. 

Speaking to Autocar Professional on the condition of anonymity, an industry analyst who closely tracks Hero MotoCorp disclosed that, “the senior company management is aiming for good growth in its scooter sales in FY2018, more than the overall scooter market. By doing so they are going to aggressively look at recovering their lost market share from TVS Motor Company.”

In March 2017, the company added four model refreshes to its portfolio that includes the Glamour motorcycle and the Maestro Edge, Duet and 10^th anniversary Pleasure scooter models.

Hero MotoCorp’s management is optimistic about the two-wheeler industry’s performance in FY2018. The company’s positive outlook for the ongoing fiscal is based on three fundamental factors that include good monsoon forecasts, infrastructure push by the central government and recovery from the demonetisation woes.

“The senior officials are estimating a high single-digit (8-9 percent) growth rate for FY2018,” added a Mumbai-based analyst.

The management has also divulged that the retail sales during April and May (thus far) are reporting higher numbers than the dispatches (from the OEM’s factories / warehouses). The company, which typically maintains inventory levels for 5-6 weeks, claims to be currently running with inventory stock for 4-5 weeks.

Production begins at Halol plant
Meanwhile, Hero MotoCorp has commenced production operations at its fifth plant, which is  located at Halol (Gujarat), during the January-March 2017 quarter. Although the company management remains tightlipped about itsplans for the sixth plant in Andhra Pradesh, it is estimated that the facility may see commencement of operations over the next two years.

On the export front, Hero MotoCorp, which is currently exporting to 35 countries, is planning to commence operations at its Bangladesh plant later this year. According to a source, while the company looks to focus on the large export markets, it aims to consolidate its business in Sri Lanka, Nepal and Bangladesh in FY2018.