 "The real low-cost bike is still on the drawing board: Pawan Munjal")
In December 2010, when Hero announced the end of its joint venture, Hero Honda, some detractors predicted a dire future for the Indian two-wheeler company. Honda supplied the technology for products that Hero largely localised for the Indian market. Would the Munjals be able to retain their hold on the Indian market by buying technology from global design & engineering houses, critics asked. Four years on, Hero MotoCorp has held on to its turf and maintained its market share in motorcycles at 54 per cent. The next big thing for Hero, its newly appointed vice-chairman & managing director Pawan Munjal tells Sharmistha Mukherjee, is to launch the company's own set of two-wheelers. Edited excerpts:
In the three years since the dissolution of its joint venture with Honda, Hero has maintained its market share and fortified its R&D capabilities. What next?
We have just crossed the first hurdle. We have had a three-and-a-half-year transition since the separation with Honda. To my mind, it was just a philosophical date for us. We all thought, could we do it? We did it in the first year itself. We could have used the joint brand for three-and-a-half years. We launched our new brand as early as August 2011. We started work on it in April and rebranded by August that year. There also were other things that we could have continued to use but we chose not to. That was all the time we needed. The next big thing for us will be to put our own products on the road and get a thumbs-up from our customers.
It is true our bigger volumes come from the 100cc segment - from Splendor, Passion, HF Deluxe. Over the next couple of weeks, you will see Splendor Pro Classic, which is a Cafe Racer, hitting the stands. This will help us generate more excitement and get us more volumes in the 100cc segment. There is something coming up in the 150cc segment as well.
For the kind of overall volumes we are doing, we need a wide variety of products across categories. So, while we intend to maintain high volumes in the mass segment, we are focusing on the scooter market, which is growing rapidly. We had showcased four scooters at the Auto Expo. We also unveiled a 250cc sports bike. Both these projects are on stream. As we did with the i-smart technology, we have been doing some more work to improve the performance of our products across categories.
Does the mid-range market interest you, given the success of players like Royal Enfield?
We are widening our product range and entering newer segments, newer territories. You will see a lot of new stuff coming from us. We have worked out a platform strategy - any new product we bring out will have multiple variants in different product categories. For instance, we can look at developing a street-fighter and on-road/off-road bikes on our sports bike platform. So, a single platform will have four to six variants.
Hero had showcased the 1190RS and RX from the EBR portfolio. Are you considering a product intervention in the superbike space?
There is room for introducing EBR products in India. Neither we nor any other player at the higher end of the market is looking at generating volumes from that category. It is a niche segment for sports or pleasure riding. We are considering bringing EBR products into India eventually, so we showcased those at the Auto Expo.
Coming back to the mass commuter segment, the HF Dawn is your cheapest offering, at Rs 37,900. Honda, TVS and Yamaha have hinted they are working on low-cost motorcycles for emerging markets. Does Hero have something similar in the works?
The really low low-cost bike is still on the drawing board. We have not been able to put it together yet. That said, we are always trying to optimise our costs, even for our current range of products.
After terminating its venture with Honda, Hero has commissioned construction of facilities in Colombia and Bangladesh...
We started entering the global market about 18 months ago. We have already started selling our products in 20 countries. We are working on building our volumes and recognition for our brands in global markets. We want to be present in 50 countries by 2020. We are setting up a manufacturing facility in Colombia and have tied up with a partner for a unit in Bangladesh. We are now exploring opportunities in Brazil and Argentina.
That said, our bedrock will always be the domestic market. We have to increase our reach, customer base and customer loyalty here. Hero targets 10 per cent of its sales from foreign business by the end of the decade. Given that, 90 per cent of our volumes will still have to come from our customer base in the country. India will always remain our most important market. This is our bread-and-butter market.
Hero has a 49.2 per cent stake in EBR and a joint venture for fuel injection systems with Magnetti Marelli. Would you look at investing in your other alliance partners, Engines Engineering and AVL?
I am open to looking at newer alliances if those make sense and create value for both us and the alliance partner. This could happen through mergers & acquisitions or through pure alliances. Inorganic growth is now a way of life at Hero. I am constantly travelling and looking for new opportunities. The pace of acquisition and tie-ups will depend on what we find where, and when.
Given the aggression with which Hero has formed technical alliances and is setting up an integrated R&D centre near Jaipur, do you have plans to venture beyond two-wheelers?
There is a lot going on in the two-wheeler business right now. I have no plans to diversify into any other segment as yet.
Automobile manufacturers are revising sales estimates upwards for this financial year. What is your take on growth prospects in the two-wheeler industry?
Clearly, sentiment is looking up. I have been saying this since the election results were declared. This is positive on the uptake of demand. I have been travelling within the country, I was in Mumbai this week and I got the same kind of response from the investor community. Some product categories, like our own, are looking up.
We are looking forward to a good festive season. We are expecting double-digit growth. The monsoon was a cause for concern a couple of weeks ago. The spread of the monsoon is not uniform, the deficit is more in northern parts of the country. But the deficit has now come down to 15 per cent.
Hero had lined up 15 products for launch between October 2013 and March 2014. What are your plans for this festival season?
We are looking at double-digit number of product launches and have already started rolling out some of these models. Over the next couple of weeks, you will see 10 new products from us. These will be new models, as well as upgrades and refreshes.
In the three years since the dissolution of its joint venture with Honda, Hero has maintained its market share and fortified its R&D capabilities. What next?
We have just crossed the first hurdle. We have had a three-and-a-half-year transition since the separation with Honda. To my mind, it was just a philosophical date for us. We all thought, could we do it? We did it in the first year itself. We could have used the joint brand for three-and-a-half years. We launched our new brand as early as August 2011. We started work on it in April and rebranded by August that year. There also were other things that we could have continued to use but we chose not to. That was all the time we needed. The next big thing for us will be to put our own products on the road and get a thumbs-up from our customers.
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Hero's product mix is skewed in favour of the mass commuter segment. Since you have tied up with performance motorcycle maker EBR (Erik Buell Racing), will we see an increased focus on premium bikes?
It is true our bigger volumes come from the 100cc segment - from Splendor, Passion, HF Deluxe. Over the next couple of weeks, you will see Splendor Pro Classic, which is a Cafe Racer, hitting the stands. This will help us generate more excitement and get us more volumes in the 100cc segment. There is something coming up in the 150cc segment as well.
For the kind of overall volumes we are doing, we need a wide variety of products across categories. So, while we intend to maintain high volumes in the mass segment, we are focusing on the scooter market, which is growing rapidly. We had showcased four scooters at the Auto Expo. We also unveiled a 250cc sports bike. Both these projects are on stream. As we did with the i-smart technology, we have been doing some more work to improve the performance of our products across categories.
Does the mid-range market interest you, given the success of players like Royal Enfield?
We are widening our product range and entering newer segments, newer territories. You will see a lot of new stuff coming from us. We have worked out a platform strategy - any new product we bring out will have multiple variants in different product categories. For instance, we can look at developing a street-fighter and on-road/off-road bikes on our sports bike platform. So, a single platform will have four to six variants.
Hero had showcased the 1190RS and RX from the EBR portfolio. Are you considering a product intervention in the superbike space?
There is room for introducing EBR products in India. Neither we nor any other player at the higher end of the market is looking at generating volumes from that category. It is a niche segment for sports or pleasure riding. We are considering bringing EBR products into India eventually, so we showcased those at the Auto Expo.
Coming back to the mass commuter segment, the HF Dawn is your cheapest offering, at Rs 37,900. Honda, TVS and Yamaha have hinted they are working on low-cost motorcycles for emerging markets. Does Hero have something similar in the works?
The really low low-cost bike is still on the drawing board. We have not been able to put it together yet. That said, we are always trying to optimise our costs, even for our current range of products.
After terminating its venture with Honda, Hero has commissioned construction of facilities in Colombia and Bangladesh...
We started entering the global market about 18 months ago. We have already started selling our products in 20 countries. We are working on building our volumes and recognition for our brands in global markets. We want to be present in 50 countries by 2020. We are setting up a manufacturing facility in Colombia and have tied up with a partner for a unit in Bangladesh. We are now exploring opportunities in Brazil and Argentina.
That said, our bedrock will always be the domestic market. We have to increase our reach, customer base and customer loyalty here. Hero targets 10 per cent of its sales from foreign business by the end of the decade. Given that, 90 per cent of our volumes will still have to come from our customer base in the country. India will always remain our most important market. This is our bread-and-butter market.
Hero has a 49.2 per cent stake in EBR and a joint venture for fuel injection systems with Magnetti Marelli. Would you look at investing in your other alliance partners, Engines Engineering and AVL?
I am open to looking at newer alliances if those make sense and create value for both us and the alliance partner. This could happen through mergers & acquisitions or through pure alliances. Inorganic growth is now a way of life at Hero. I am constantly travelling and looking for new opportunities. The pace of acquisition and tie-ups will depend on what we find where, and when.
Given the aggression with which Hero has formed technical alliances and is setting up an integrated R&D centre near Jaipur, do you have plans to venture beyond two-wheelers?
There is a lot going on in the two-wheeler business right now. I have no plans to diversify into any other segment as yet.
Automobile manufacturers are revising sales estimates upwards for this financial year. What is your take on growth prospects in the two-wheeler industry?
Clearly, sentiment is looking up. I have been saying this since the election results were declared. This is positive on the uptake of demand. I have been travelling within the country, I was in Mumbai this week and I got the same kind of response from the investor community. Some product categories, like our own, are looking up.
We are looking forward to a good festive season. We are expecting double-digit growth. The monsoon was a cause for concern a couple of weeks ago. The spread of the monsoon is not uniform, the deficit is more in northern parts of the country. But the deficit has now come down to 15 per cent.
Hero had lined up 15 products for launch between October 2013 and March 2014. What are your plans for this festival season?
We are looking at double-digit number of product launches and have already started rolling out some of these models. Over the next couple of weeks, you will see 10 new products from us. These will be new models, as well as upgrades and refreshes.