Cost efficiency will help win electric vehicle race: Hero MotoCorp

It has already tied up with Bengaluru-based Ather for its fast-charging technology

Largest two wheeler maker Hero MotoCorp will have multiple tie ups and partnerships with companies so that it can take advantage of an established system. The company plans to launch its first EV product in March which is likely to be an electric scooter

It has already tied up with Bengaluru-based Ather’s fast-charging technology. Hero owns around 38 percent stake in the company. A senior company executive said that both the companies are exploring synergies in developing charging infra, global business or front end adding that already there is a lot of learning which is getting cross pollinated between the two companies.

Similarly, it has formed a joint venture with Taiwan based Gogoro in which it has pumped in $285 million to develop battery swapping platform. “We are approaching the world of EV as an ecosystem rather than a product or revenue. Hence we are forging many tie ups besides our existing investment as we strongly believe EV is currently about partnerships and collaborations rather than competition,” said Niranjan Gupta, Chief Financial officer at Hero Motocorp.

Hero’s existing strength from the traditional IC engine business like in distribution, sourcing, manufacturing or logistics will help to reduce investment in EV and help to cut cost of the product.

However, a report by brokerage firm UBS Securities recently said that among its established peers like Bajaj Auto and TVS Motors, Hero remains the most vulnerable to this gradual shift from IC engines to electric.

UBS expects Hero to have a 10 percent market share in EVs in the long term , and its overall two-wheeler market share to fall from around 35 percent currently, to 32-25 percent in between FY 25-30.

Hero is building a hybrid distribution strategy for EV where it may have separate distribution outlets in metro cities as customers there may demand a certain experience and environment. However, for Tier 2 and Tier 3 cities, the stores need not be any different.

“In some cases we may have exclusive distribution outlets for EV but in more ways than one we will be looking to leverage our existing strength. The physical part would be no different in terms of servicing whether you do it from an IC store or EV. We are blending learnings from our knowledge of the customer base and implementing the strategy” Gupta said.

The electric vehicle segment has seen mushrooming of companies including start-ups funded by deep pocket venture capitalists like Ola Electric which has set up a factory with an annual production capacity of 10 million units. But Hero Motocorp feels that there will be consolidation going forward, and cost efficiency will determine who will survive.

“While today cash burn is fancy, in future cash burn has to give way to cash earn and that’s where cost competitiveness will come into play. So players who can establish long term cost competitiveness will determine winning,” Gupta said.