Your share price is now at a 5-year high, gaining 50% in last 8 months. What do you attribute this to?
I would not like to comment specifically on share price movement, but I can talk about what we are changing at the company.
Our company has a strong legacy, with iconic brands built over the last 40 years, providing mobility to millions. What we have done in recent past is to change gears, increase the speed in every aspect, and adopt a more focussed approach with ruthless prioritisation.
We have upgraded 200 Hero stores, calling them Hero 2.0, in almost 200 days; at the rate of 1 store a day. These are a significant facelift of our stores that will enable a much enhanced customer experience. We have had 7 key launches in 7 months, with more to follow in the next few. We have increased VIDA’s geographical presence with a target to cover 100 cities by this December, from just 3 cities in January. We are rapidly building charging infrastructure in parallel with an aim to provide convenience to EV customers.
Our aim to win in premium has started off in a big way, with 25000 + bookings for HD X 440 and 14000 for Karizma. With more launches in store, and increase in supplies, we are off to a great start here.
Not just in terms of product and place, but we are also making big moves in digital. Our focus is on not just having digital as an enabler but as a business itself. Our Hero One app, launched in January this year, has already reached close to a 3 million user base, and the app now is ranked no. 1 on Google Play Store amongst the Auto OEMs. We will be vertically scaling this up, which presents a big opportunity of monetisation in future. You will hear more on this very soon.
You will see speed and scale in everything that we do. This is a long journey and we will continue to do the right things. We believe we are moving in the right direction and the results will follow. It heartening to see enhanced investor faith in the brand.
Hero MotoCorp registered record festive sales of 1.4 million units this year. How much of this volume has come in from rural markets and what kind of growth have you registered in rural sales compared to last year in this period?
Yes, the festive season sales have been the highest ever for us this year, clearly indicating a strong customer preference for our range of products. Overall growth has been close to 20% compared to last year’s festive season. We are delighted with our performance and the fact that our customers have continued to repose their trust and faith in Brand Hero.
Our strong portfolio of brands, scale of distribution and new launches done this year have helped drive this growth across geographies. The festive season is a clear testimony that rural is coming back to growth in addition to the positive sentiments in key urban centers, which augurs well for the country in general and the two-wheeler industry in particular.
Slightly more than half of our sales have come from the rural markets. Our secondary network, which is primarily based in tier II & III cities and rural areas witnessed a 26% growth. We also saw a 10-fold increase in e-commerce sales and our retail finance penetration was highest at 68%.
What is your outlook for demand for the remaining part of the fiscal in terms of consumer demand for two-wheelers? What measures are you undertaking to take on competition and increase market share?
With this robust retail sales, our post-festive channel inventory has now come down to its lowest level in more than three years. This sets us on a steady growth path for the rest of the fiscal year. We expect the positive trend to continue with the upcoming marriage season and a good harvest owing to normal monsoons.
Our focus as always remains on delighting the customer and not worrying about competition. Our strategy for growth is tailored specifically to the customer segments, our role, and our targets. For example, in the 100/110 cc segment, being the leaders with around 70% market share, our role is to grow the pie. Hence our strong brands like HF Deluxe, Passion, and Splendor will focus on getting more households into mobility, while upgrading them to better products. We are going micro here, looking at household penetration at not just the state but district/ town level and aligning our offerings, sales, marketing, and financing plans accordingly.
In the 125cc segment, we are working towards regaining market share. We have launched feature-rich variants through Xtec series; Super Splendor Xtec and Gamour Xtec. In this segment, we are focussing on premiumisation as the route to gaining market shares.
In the premium segment i.e. the 150cc and above, we are focussed on building a full portfolio of products across various categories. We have done a spate of launches this year and with more to follow, it will bolster our play in this segment. The brand association with Harley-Davidson, launch of Premia stores, existing store facelifts, and focus on digital customer journey bring a holistic approach to winning in this segment.
In the scooter segment, we are excited about the Xoom 110 cc, which has been received very well. We will soon launch the Xoom 125cc and Xoom 160cc as well, which we showcased at EICMA in Milan recently.
Above all, any product that we are launching, we are ensuring that these have some first-in-class, and best-in-class features.
How is the international business shaping up?
Our focus in the last few years was to increase our global footprint and we are today present in over 47 countries across multiple continents. This gives us the platform to scale up in a focussed manner in the next phase.
We will prioritise top-10 markets for rapid scale up, by putting resources disproportionately. At the same time, we will nurture and build the rest of the markets efficiently, while new market entries will be based on the size of the prize and other strategic considerations.
We believe, that we are at the right juncture where international business can become a growth engine for Hero.
Hero MotoCorp has expressed it ambition to increase its presence in the premium segment and has also launched several products to realise this objective. What kind of growth have you seen so far in this segment ? As you mentioned earlier it will take a couple of years to realise your goals in this segment, what more measures are you considering, be it in terms of new launches or services ?
India is a story of many Indias and while the bottom of the pyramid is slowly coming back to consumption & spending, the middle class/upper middle class is spending like never before. This has led to a surge in the growth of the premium segment, which has been growing at more than 20% per annum recently.
As we have earlier mentioned, our focus is on building the full portfolio. We have already launched several products this year; and tasted early success with the Harley-Davidson X440 getting 25000 bookings and Karizma XMR with over 13000 bookings.
It is not just products, there are actions on all fronts as we have launched the fabulous looking Hero 2.0 stores that will enhance the experience for our customers. We have also started launching the Hero Premia stores, which will retail only exclusive premium products, enhancing the brand imagery. The Digital journey is being revamped to make it the best-in-class experience, since for the premium customers the experience starts well before they arrive at the store. The brand association with a marquee international brand like Harley-Davidson completes the story.
We have some more premium launches planned this year. The order book is healthy and as we ramp up supplies the retail numbers will go up too. Currently we are delighted to be running with a 4-5 months order book. I expect that with supplies ramping up, we will be at a capacity of 10,000 units per month in the upper premium segment, by the end of the fiscal year.
You announced your entry into the European market recently through electric. What kind of demand are you seeing for the VIDA? What has been your experience of and learnings from your EV foray so far? What are your plans in the EV space when it comes to sales, market share and also separately towards setting up of charging infrastructure?
On VIDA, currently we are putting the building blocks in place. First thing we are doing is increasing the number of dealers. True to our Mission of Collaboration, we are utilising the expansive Hero network to rapidly increase VIDA’s presence and we are already in over 100 dealerships across the country and we will be in 100 cities very soon.
Second, on charging infrastructure, we have tied-up with Ather and you will see important action on this front soon. So, clearly the focus is on building infrastructure. In terms of production, we are manufacturing about 1000 scooters per week already. So, over the next couple of quarters, you will see scale-up on the EV front.
We are focused on building a robust product portfolio, extensive geographic presence, and convenient charging infrastructure. We are in this segment for the long haul.
Our European market entry, as announced recently, will provide a global image to VIDA, as we develop this brand over next few years in our pursuit for leadership in EV segment.
You talked about Premia dealerships. How many premium stores you plan to have this year?
We have already launched three Premia stores and by June 2024 we will have 100 Premia stores across key markets in the country. These will be our flagship stores and sell only premium products. These stores will provide a seamless phygital journey integrating online and offline touch-points along with new-age configurators and applications of AR (Augmented Reality). We believe that these will play a key role in winning market share in premium segment, alongside a full portfolio of competitive products.
What is your focus for the rest of the year? Any new launches planned?
Our focus will be to continue building on our strong performance in the festive season. As I mentioned, we will continue revamping our sales channel to enhance customer experience launch new products and bring more digital innovations.
In terms of products, exciting times continue as we plan to launch the Hero badged bike on the 440cc platform and the two brand new large-wheel scooters that we showcased recently, the Xoom 125 and Xoom 160. Further, we will also see a new model in the 125cc segment. In EVs, we will be launching products in the mid and affordable segment in FY 25.
What are your views on the Indian economy and prospects of growth in the country?
We at Hero, have always been positive about the prospects of India. The world is coming to India, and under the leadership of our Prime Minister, we are taking India to the world.
Most of the economic indicators are trending in a positive direction, and now rural also is bouncing back as seen through festive season. The huge capex spending done by the government will start paying rich dividends as we move forward.
At Hero, we have always focussed on nation-building. We started providing wheels to the nation through affordable mobility solution, reaching a cumulative base of 112 million two-wheelers. In large parts of India two-wheelers are essential means of mobility and are income enablers, as people can sell their produce over longer distances, and reach educational institutions and jobs. They are almost a necessity and not a status symbol.
Economic growth augurs well for the two-wheeler industry and vice versa. It’s a symbiotic relationship, as more sales of two-wheelers mean more people become mobile, more people get employed as dealers, service technicians, suppliers and more. The eco-system of two-wheelers is an employment-intensive industry, which helps inclusive growth.
Further, at Hero, we are focussed on promoting local production. More than 90% of our components are sourced locally, and we have been reducing our dependence on imports every year.
India is moving from Make in India to Make for the World. These are exciting times for India as a country and Hero MotoCorp as a company.
Keyword: Hero is 'changing gears,' embracing speed, scale, synergy and simplification, says Niranjan Gupta, CEO, Hero MotoCorp