A Look Into the Future: HERO Without HONDA

Indian two-wheeler market has been seeing a lot of action, and much more threatens to unfold in the coming months. Various manufacturers have a bevy of launches lined up in the premium segment, and the biking scenario is getting tougher by each passing day. Lower down the hierarchy, Honda has been clawing into the commuter segment with its Dream Yuga and Dream Neo models, but Bajaj isn’t far behind with its Discover 100T model.

In this backdrop, we felt it was imperative to pay special attention to a manufacturer that has a strong legacy behind it but has been losing steam as of late. We are talking about India’s largest two-wheeler manufacturer, Hero Motocorp.

In its eventful 30 year existence, it is probably facing its toughest time now. Its partner Honda severed ties some time back, and since then, the Jap has been on a killing spree. It inaugurated a new plant a few days back and has set its eyes on becoming the leading 2-wheeler maker in India by 2015-16.

In this write-up, we focus our crosshairs on Hero Motocorp as it has a sizeable fan following among our readers. It has not had any new launch in the last few months, and the anxiety of their customers is growing.

We bring you a detailed analysis of what is brewing for India’s largest two-wheeler maker.

STRENGTHS:-

Hero has quite a few aces up its sleeve.

1. A humongous business valued at 23,768 Crores.
2. A market leading share of 48%
3. The pride of being the most trusted name in commuter/entry-level bikes
4. A broad dealership-cum-service network which, surprisingly, exceeds the reach of all its competitors combined

ODDS STARING IN THE FACE:-

But life is not going to be a bed of roses for Hero Motocorp in the coming months. Here’s why :-

1. Its much-vaunted dealership-cum-service network was built with the assistance of Honda, which has parted ways and is baying for Hero’s blood in the commuter segment. With the loss of Honda, Hero also has to bid goodbye to Honda’s technology in 2014. Whether Hero will be able to forge its own reliable engines or not, that time alone can tell.
2. Hero’s sales have been sliding, both in the entry-level as well as premium segments. It is under a two-pronged attack, with Honda slashing at it from below in the commuter area and Bajaj also taking a hit at it from above with Pulsar in the premium segment.
3. If the fall in sales was not enough, there has also been a general increase in operating costs with a rise in the input material prices. It doesn’t come as a surprise that Hero’s stock has fallen by 3.4%
4. Its life post the partition from Honda has been pricey, with the rebranding exercise having grabbed a huge chunk of its expenses.
5. To make matters worse for the corporation, there is the widespread notion that Hero is just capable of playing around with small entry-level bikes. It isn’t just perceived as a premium bike maker.

THE WAY FORWARD:-

Nevertheless, Pawan Munjal, MD & CEO of Hero Motocorp, has a turnaround plan in the offing. Here’s the broad outline.

1. EXPORT PUSH-One of the clauses of the Honda pact was that Hero will not walk around in those foreign markets where Honda was present. Well, it just about meant the whole world as Honda has a sizeable footprint. Now that the ties are broken, Mr. Munjal has set his eyes on pushing sales through the export route. A shortlist of 30 countries has been prepared where Hero thinks they might get an easy head-start. We had reported about its foray in Central America with Indy Motos Group here.
2. SELF-SUFFICIENCY IN TECHNOLOGY-Come 2014, and Hero will lose its grasp over Honda’s ricey-sounding mills. With an eye on that, India’s largest R&D centre has been set up in Kukas, Rajasthan to stoke innovation and fuel growth. It has also linked partnerships with Engines Engineering of Italy for designs and with AVL of Austria as well for engines. The pact with Erik Buell Racing of the US for premium bikes is well known by now, with Karizma fans warming their heels for a bigger Hero bike.
3. BRAND REPOSITIONING-Splendor and Passion have been the workhorses of Hero, having cornered a lion’s share of the entry level market as well as a huge fan following. However, they have become a bane for Hero as well. Somehow, these two bikes have become the face of Hero. People widely perceive it to be incapable of handling the premium segment. To fend off this challenge, Hero is looking forward to launching newer bikes with its own technology. They plan to make the models more youthful and contemporary.
4. A GLOBAL OUTLOOK-Despite being on a slippery slope, the corporation has its head held high. They aim to take a leaf out of Honda’s book, and are confident of emulating it. True to Honda’s identity, they also want to have a global presence with self-sufficiency in technology and a wide portfolio which will encompass lightweight scooters as well as big, rapid bikes.

Do you feel Hero will be able to script a comeback? Will it fail to do so and stay cocooned within its entry-level bubble? Do share your views on what will it take Hero to retain its dominance!

Also Read: Revealed: Three New Hero Motocorp Launches in the Coming Months

Inspiration & Figures: ET