After posting sales of more than 1.5 million units per quarter in domestic market, Hero Motocorp is now all set to enter into new territories, to expand its global footprint. The company which reported 43% jump in profit for the third quarter of 2011-12, has announced that it will start to export two wheelers in new overseas market in the first of the financial year 2012-13. New markets include South East Asia, Africa and Latin America. It is currently in process of finalizing its partner and business model. The company had earlier planned to start export in the current quarter, however due to strong domestic demand and production constraint; it will now start exporting in the financial year 2012-13.

Mr Anil Dua,  senior vice president of marketing and sales at Hero MotoCorp said,  “the company has seen about 20% sales growth in exports and is drawing up a road map to expand its base in existing markets like Latin America and South Asia. South East Asia and Africa are also among the markets that Hero MotoCorp plans to tap to grow exports. We are completing our strategy, business model and partners to enter into the new markets. We should be able to start our operations in the next couple of quarters.”

The company is also increasing its capacity to 7 million units per year for the financial year 2012-13. Currently it has 6.2 million units installed capacity which it will expand to 7 million units by March 2012. The output will be increased at all of its three plants, Haridwar, Gurgaon and Manesar. For example, it is expanding its Haridwar plant capacity to more than 9,000 units a day from current 8,000 units a day.

The company has already expanded its scooter production capacity to 50,000 units a month from 35,000 units a month. The company sold record 61,17,599 units of two-wheelers in the period January-December 2011, a growth of 19.2% over the calendar year of 2010 when it had sold 51,34,549 two-wheelers.

The company also expects to remain its royalty payment at current level for the fourth quarter. The company has paid royalty of Rs.228 crores for this quarter which is increased from Rs.210 crores it paid in the second quarter, due to yen’s appreciation against rupee.  The above figure suggests that the cumulative royalty for 2011-12 will be around Rs.846 crores (228+228+210+180) which is higher than expected amount of Rs.685 crores per year. The company signed the licensing pact worth ¥45,000 million (about Rs.2,400 crore) in April last year which is payable in 14 quarters.

Commenting on royalty Anil Dua added “We expect the royalty payment for the March quarter (Q4) to be lower than last quarter, as we expect the rupee to appreciate from the current levels… Rs.53-54 (versus dollar) is not stable.” He added that the company is in the process of building its research and development (R&D) capabilities, but it won’t happen overnight.”

The company as also hired about 255 engineers for building research and development facility and it expects to develop its own motorcycle by 2015. It seems that the company is on course for achieving sales of 10 million units a year by 2015 something which its earlier joint venture partner Honda aiming to do by 2020.

– Mahavir Kothari




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