😯 Hero MotoCorp No Longer the Two-Wheeler Hero?
Back in the days, Hero MotoCorp used to be all the rage in the two-wheeler section. But it has swiftly been losing market share. Here's why.
Improvise, Adapt and Overcome isn't just good advice if you're out with Bear Grylls in the jungle. It is also great advice for businesses.
And it's probably something Hero MotoCorp needs to focus on.
Because the company just lost its dominant position in the two-wheeler market to Honda.
And TVS recently beat it to become the sixth largest automobile company in India.
So, what's going on at Hero? Why is one of India's oldest two-wheeler companies lagging behind?
📉 Hero's Horrible Performance
Despite the fact that Hero saw a 20% growth in sales in October, its market share has been steadily declining.
Its share prices also haven't performed all that well thanks to muted sales year round. It has given 44% lower returns than the Nifty Auto Index in the last 5 years.
But why is this happening?
Because Hero hasn't listened to Warren Buffett's advice and put all its eggs in one basket: the Splendor basket.
Hero's Splendor is its best-selling bike and has been so for ages now. And while that's great, the sad part is no one really cares about other Hero bikes or scooters.
Even in states like Uttar Pradesh and Rajasthan, where Hero is still the most popular brand (it has a 57% and 54% market share in these states respectively), people don't really buy Hero's bigger and more expensive bikes and scooters.
But if one product is working for Hero, why not double down on it? Why not work with what works?
The problem is Splendor is a cheap entry-level bike. Meaning, it's good for those just venturing into driving bikes, kind of like the daal chawal of bikes.
But the demand for these daal-chawal bikes is now dying. People want exotic food and exciting bikes in the times of social media.
And these are the bikes that Hero isn't really good at.
Let's look at the numbers:
Hero made only 18% of 125cc bikes this year as compared to 40% in 2020 and only 4% 150 cc bikes. Only 6% of the scooters sold in the country came from Hero.
The worst part? There are still lots of people who want these entry-level bikes. But inflation has increased their prices by almost 40%. So those who want these bikes can't afford them. And those who can afford these bikes don't want them.
Which is exactly why Honda has won market share from Hero. It is innovating and making better 125cc and above bikes.
So, what is Hero doing about this situation?
Well, lots!
🏍 Hero's Action Plan
Over the last few years Hero has realised that its grip on the Indian market is loosening. So, Hero has been ramping up research and development spending and hiring a whole new set of executives to whip the company back in shape.
But this hasn't been working out.
Hero's R&D spending is one of the highest out there: Rs. 2,900 crores in the last five years.
However, this hasn't yielded much result. Probably due to the company's structure.
Hero works on the concept of collective leadership. There's obviously the CEO Pawan Munjal, but under him there are several different heads, who handle different departments and report to him. Now, this may sound standard. But according to company reports, this fragmentation of responsibility means each leader is just working on their separate departments instead of collaborating and making the necessary policy changes required to move the company forward.
This is probably why it has taken the company so long to enter the red-hot EV segment. But even its entry here hasn't made much impact.
Its Vida Electric Scooter is one of the costliest EV two-wheelers out there, making it unpopular.
Plus, Hero relies a lot on foreign talent. Currently its CHRO and its product head are both foreigners who probably don't understand what India wants.
So, all of these factors are eating up Hero's market share.
But all of this has given its other competitors a huge boost. For instance, TVS.
It has been launching a lot of new and exciting products, especially in the EV segment that has helped it rapidly gain market share and market cap. For instance, its market share in the EV segment was 5% in June but it has increased to 14% in August.
It is currently the third top company among EV two-wheeler companies.
And even in the scooters and 125cc+ segment, TVS’ market share increased from 15% and 11% in FY17 to 21% and 18% in FY22, respectively.
And another major competitor that is emerging for Hero MotoCorp is its own flesh and blood Hero Electric.
Back in 2010, the Munjal family decided to split up the affairs of the company, with Naveen Munjal and Vijay Munjal getting ownership of Hero Electric and Pawan Munjal handling Hero MotoCorp.
Hero Electric has since been focusing on EVs and has quickly become the market leader in this space, with a 28% market share.
Its cheap and innovative EV products and strong dealership network have helped it earn this coveted title in the crowded EV market.
And with EVs now gaining favour with consumers, Hero MotoCorp will have to learn from its long-lost sibling the art of selling electric vehicles.
Only then will the age-old company be able to survive.
⚡ In a line: Hero MotoCorp needs to innovate and improvise fast to survive in this new age EV world.
💡Quick question: What else do you think Hero can do to improve its sales?
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