Hero’s Export numbers pose a very big challenge for the company to liquidate such a massive stock even in international markets!
It is literal dharam sankat for Hero MotoCorp as it is caught in a very tight situation. There are various reports – some say Hero is left with upto 2 weeks of BS4 stock, others put it some number at 2-3 Lakhs, some say more.
But what is a confirmation is that Hero’s dealers are sitting on a massive pile up of Bharat Stage 4 compliant motorcycles and scooters, otherwise the India’s largest maker would not have gone ahead to the Supreme Court requesting for an extension in the sale of its existing stock. Hero was the only two-wheeler maker which officially announced that it had filed a plea with the Supreme Court of India to request a relaxation in sales of BS4 vehicles.
Let us, for the sake of calculation (details shared later in the story), consider 2 Lakh as a conservative estimate of the remaining stock with Hero MotoCorp dealers. Now, on 28 March, Pawan Munjal encouraged and pacified his company dealers in a video conference. According to a report, he has also assured them that the BS4 stock will be taken care of by the company and they need not worry. Though it has not been concretely established that Hero will actually take back all the remaining stock from dealerships, but there are ample amount of hints that it may happen (because there are not many other options of liquidating such a hefty stock anyways).
Let me also tell you that it is a herculean and costly task for makers to pick back stock from hundreds of dealerships located in different parts of the country which is why they avoid doing it at all costs. So, let us assume that Hero has decided to get back all the BS4 stock from its dealerships. Now, the next question is what will Hero MotoCorp do with so many ‘already-sold-in-its-books‘ 2-wheelers?
One of the widely populated belief is that it will export them to various countries because most of them still adhere to Euro 4 norms (which are roughly equal to BS4). That is no problem at all but Hero’s export numbers are – a major one actually!
Hero’s Export Numbers
According to the official SIAM sales data we have, Hero MotoCorp exported 18,046 two-wheelers in February 2020. Cumulatively from April 2019 till February 2020, it registered total exports of 1,60,299 units. These are 10 percent lower than the corresponding preceding fiscal (for the same period). Since we do not have the March numbers yet, let us assume that Hero ends this fiscal with total exports at somewhere around 1.80 lakh units.
Now, if you haven’t already understood the magnitude of the problem – here is the issue. At Hero’s current run rate, it will take one year or more for the company to consume the already manufactured BS4 stock in its export markets. That is one year of almost no sale from the export market!
Though the Coronavirus pandemic has really caused a lot of problems in the last couple of weeks but it appears Hero called in upon itself. Rajiv Bajaj, MD of Bajaj Auto said that few makers did not plan the production transition properly and continued to make BS4 vehicles even till late February 2020 in greed. It is believed that he was referring to Hero MotoCorp (here is the report).
With so much of stock overhead, terribly dull buying sentiments, COVID-19 causing havoc the world over, it will be worth a watch how Hero handles the situation at hand! Testing times these…