Good rebound in sales of commuter motorcycles. More interesting is the increase in scooter sales and Exports on mom and yoy basis.
Even the push with Ather and Gogoro is prefectly timed and positioned. Investors dont care two hoots if they pust the Ather name instead of Hero for their ev products.
As mentioned before, the achilles heel remains its lack of products in 300cc+ performance motorcycle segment. The likes of Honda with CB350, Bajaj with Dominar and even Mahindra Mojo are already present but Hero doesnt even have a demo product ready.
The increase in sales that particular day was driven by data obfuscation. On 9th August Hero celebrated Hero Day, on that day Hero had 1 day exclusive scheme - 5000 discount on scooters, 2000 on motorcycles, etc. Dealers also withheld invoicing so customers could take advantage of the schemes which were only available on 9th August.
So, the 1 lakh figure is more of the combined backlog for 7-8 days and not actual single day retail figure.
In fact, pretty much all dealers do this. OEM companies have started to concentrate on retails on particular days like Dussehra, Dhanteras, etc. So, dealers with hold invoicing in the dealer management systems or convince customers to take delivery on a particular day to achieve big figures. Nobody is checking what retail is being done in the preceding days, they are happy the BIG FIGURE got hit on a particular day.
I know of Hero Dealers who “retail” 1000 vehicles on Dussehra. You think of the practical implications of actually delivering 1000 vehicles in a day from a dealership. A vehicle delivery would at least take 5-10 minutes even if vehicle is pre-selected, you have to hand the customer keys, create their invoice, do the RTO system entry. It’s basically not feasible.
Hero Motocorp is still the leader in 2-wheelers market but the lead has eroded completely. Hero held a comfortable 35-40% lead over the closest competitor Honda for almost every year between 2016-2019. Hero had sold 5279473 units in 2020 while Honda sold 3524668 units.
In the month of August 2021, Hero sold 431137 units (down 24%) while Honda sold 401469 units (down only 6.25%)… The difference is a paltry 29668 units.
As mentioned before, Hero lacks any premium bikes in 250cc+ catagory. The likes of Bajaj with Dominar, TVS with Apache and RR310 and Honda with CB350 are clearly beating Hero. Hero’s 200cc bikes are not big sellers or have any equity amongst enthusiasts. With Honda charging ahead in economy bikes, Hero’s road ahead seems to be a tough one.
Hero has lost a lot of brand value compared to Honda. Hero has not been advertising its 200R, Xpulse, 200t and 200S bikes. Hero clearly lacks the pull in the current market
Hero has indeed made inroads with Ather and Gogoro in the EV space but we are yet to see any real results. Ather is also facing a new threat from Ola. Hero motocorp is under threat and does not seem to have any clear vision to lead into the future.
Hero’s Harley bet is not big enough to keep investors happy. It is time Mr. Munjal and his team come up with a 5 year plan.
So i was talking with an employee whille going to a supermarket to buy fruits who recently bought a hero splendor which is the bread and butter product for hero moto corp ,i asked him why did he buy a splendor and not some other bike or a scooty like activa or even an electric bike
he gave these valid points why splendor sells so much
1)mileage he told me it is class leading and almost 20 to 30% more efficient then a activa
2)heavy duty can carry 100s of kg even on incline where most 100 cc completion bikes fail
3)resale ,parts availbilty and relaibilty these machines are bulid like tanks according to him they don’t even die in severe accidents parts are super cheap and can be get anywhere and are super easy to sell and good value even after using it for many many years.
4)activa is good for short distances in city ,to carry stuff and women can ride it but in rainy season they are no safe and in his village roads they are not very successful .
i felt like splendor has a cult like following amongst the common man in india who chase reliabilty and cost of ownership over any other thing ,this is the reason why in our country maruti has a 50% market share in cars
In this short trip i decided to see how many splendors i can spot on my way to the market ,it was quite surprising that each shop or business i passed had one or more splendor ,following days each time i went out it was hard not to notice that many houses business had atleast 1 spelndor parked outside there premises ,it is the go to bike for most delivery guys be it zomato or amazon.
Now comparing it to its peers bajaj and tvs .For me tvs is out of the equation ,it has great products but there balance sheet with so much debt isn’t something i would be comfortable investing in.Now coming to bajaj there products are great but what i was told and read they are not very reliable be it there bikes or there small cheap car or quadricycle bajaj qute(you can read on quora or internet forum or reviews about there reliability) and they already have market presence and a good part of there revenue comes from countries like africa and other countries whereas for hero moto they have recently entered the african market and i feel like there is a huge runway for growth prospects in the electric bike or the international market for hero moto corp plus at current valuations with the safety net of steady cashflows from a product like splendor where electric bikes will take 5 to 6 years to catch up maybe more in tier 2 and 3 cities this seems like a head i win or tails i don’t loose much opportunity, i am getting a leading 2 wheeler manufacture in the world @ less then 15 pe with no debt and 3% yield and huge runway for growth i will hapily take it.
I think there is a big question mark on the terminal value of buisness of Two wheeler with IC Engine
I do not feel that 2W EV will take 5 to 6 years from here to catch up with its ICE peers. In my opinion there will be disruption in 2 W segment in much shorter period of say 2 to 3 years and Bajaj and Hero are not aggressive in EV as it would tantamount to cannibalize its existing flourishing business
Exports have risen 134% YTD compared to last year. While the lockdown was in place in 2020, we also had a partial lockdown in 2021 negating the effect. Also, the exports units are higher compared to last month or same month last year. Year to date figure for exports is almost the same as scooters now.
Scooters display a flat sales figure which is dissappointing. Lets hope the festival brings cheer in the scooters segment.
Honda has begun an onslaught in the econo-commuters segment ruled by Hero motocorp. This is denting sales for hero in domestic market. Time to beef up. A few refresh launches are coming up.
Sale of Two Wheelers: Revenue generated from sale of Two Wheelers is the main contributor to the overall revenue of the company.
Spare Parts & Components: Provision of Spare Parts & components are also essential for any Two Wheeler. The company is providing genuine parts to customers through its online portal. Parts business grew 11% in FY19.
Income from Services: Revenue in this category comes from various services provided by the company. For instance, Dealer support service, Goodlife program for customers & other related services.
Other Operating Revenue: This includes Duty Drawback & Other Incentives, Incentive from state Govt. under different schemes and some other minor incomes.
There will be a big focus on exports going forward. Hero has now given permission to Indian dealers to open dealerships outside of India in markets where Hero operates if they have any relative/friend there interested in running the dealership.
Ather will use Hero’s networks to export the scooter to other countries.
For local market, Hero will offer electric scooter with swappable battery I believe. Should be out before end of this FY - subject to brand issues being resolved with Hero Electric.
Another plan from Hero for Global expansion:
Hero MotoCorp has partnered with Gilera Motors Argentina to reinvigorate and expand its operations in Argentina. Check out this link:
The brand name tussle with hero Electric is passe. Also, Hero doesn’t seem willing to acquire Ather (although it would fit perfectly.) Possible reasons can be reluctance of the owners of Ather or the skyhigh valuations that the current crops of startups are demanding.
Hero is currently firing all its EV business cylinders as is evident from Gogoro tieup, Ather stake and the new EV subsidiary and Plant setup. Let’s hope it outdoes OLA.
Will they be able to sell their VIDA branded e scooters through existing Hero dealer network? Will be important to know the extent of the Hero Electric, Hero Moto demarcation.
Got me thinking about the battery swapping approach.
Apart from these considerations, there’s also the aspect of how people treat their things vs those that belong to everyone. Think of Yulu (I know the example is not 1-1 match, but I feel the essence of the point still holds). The condition of Yulu bikes has significantly deteriorated. Each person has their own way of handling things (immaterial of how menial or complicated the task may be). Probably in countries where the approach to public/collective property is much more disciplined, such things may work (Japan, Taiwan, etc.). I feel it may be difficult in other places.
Any views on the EV developments?
edit: Hero’s first launch will be a fixed battery using charging stations.
of course, that’s only 1 point (the final point about structure, etc.). But the other items in terms of idle batteries, cost of the stations, throughput etc. would still hold
Like you have mentioned, Hero’s first EV launch will be using charging stations and battery swapping at the moment only seems to be applicable to Gogoro’s India launch whenever that happens and in whatever form. The important point for investors/analysts to note is that EV space has multiple customer segments and there will be a need for more products to cater to all these segments at a price point (both upfront and operational) that makes sense. At a high level, I can imagine the below dimensions:
Placement: a) Mass Market (eg: Amphere) b) Premium (eg: Ather)
Type: a) Scooters b) Bikes c) General Mobility
Geography: a) Urban b) Rural
Now, each intersection of these dimensions could be seen as one customer segment in itself. Somewhere there will be a segment whose needs are swappable batteries. In Taiwan, this happens to be a large market, I don’t know what this would be in India.
