Pawan Munjal, chairman and CEO of Hero MotoCorp
Picture: Jamel Toppin for Forbes India
Hero MotoCorp’s bikes and scooters adorn the foyer of the corporate’s analysis facility in Jaipur, 270 km south of New Delhi. Taking delight of place among the many fashions is the long-lasting CD 100, the primary bike launched in 1985 by its former three way partnership Hero Honda with Japan’s Honda Motor Co. The success of the CD 100 and different fashions helped make New Delhi-based Hero the world’s largest maker of bikes and scooters by items in 2001. Immediately, Hero nonetheless has a commanding share of 37 p.c (by items) of India’s two-wheeled market, effectively forward of Honda, which now has 25 p.c and competes in opposition to its former accomplice in India.
However Hero’s commanding place could possibly be threatened by the shift to electrical autos (EVs). Whereas electrical two-wheeled transport remains to be a tiny fraction of India’s market—143,837, or simply 1.Three p.c of complete annual two-wheeled automobile gross sales within the yr to March—that determine has grown over four-fold in three years.
The federal government can also be underwriting the market’s progress. It elevated present client subsidies on two-wheeled EV costs by 50 p.c and doubled the cap on this incentive to 40 p.c of the worth, bringing the previously excessive costs of two-wheeled EVs extra in step with related gas-powered fashions. In mid-September, the federal government introduced $3.5 billion in incentives to ramp up the native manufacturing of batteries and hydrogen gasoline cells. These strikes are all in help of the federal government’s declared purpose to have at the least 30 p.c of all new autos bought in India—together with two-wheelers—be EVs by 2030.
The rise of EVs is among the largest potential threats to Hero’s decades-long market preeminence. Whereas Hero has a historical past of constantly rolling out new fashions, it’s an EV laggard—it has zero electrical two-wheelers on supply. In the meantime, over a dozen firms in India—from startups to giant home rivals, reminiscent of Bajaj Auto and TVS Motor—now promote greater than 50 various kinds of electrical two-wheelers in India (two-wheelers are outlined as mopeds, scooters and bikes).
How does Pawan Munjal, the corporate’s chairman and CEO, reply to this problem? He’s assured that Hero MotoCorp cannot solely make the shift, but in addition dominate the nascent EV market. “Now we have the aptitude, we have now the energy, we have now the wherewithal, we have now the monetary muscle to grow to be the EV chief,” says Munjal, 67, in a video interview in August from Baltimore, US, the place he was on a enterprise journey.
The enduring Hero Honda CD 100, one of many first four-stroke bikes bought broadly in India
Picture: Courtesy Hero MotoCorp
Certainly one of Munjal’s largest opponents within the EV area is—satirically—his nephew Naveen Munjal, who runs a completely separate firm referred to as Hero Electric Vehicles, which is now India’s market chief in electrical two-wheelers by market share. With a couple of dozen completely different variants, the privately held Hero Electrical final yr bought over 50,000 EVs. Sohinder Gill, chief govt of Hero Electrical, says the entry of a giant participant like Hero MotoCorp proves there’s a actual shift occurring and that can solely broaden the market: “There may be greater than sufficient room for everyone to develop.” Complicating issues for Hero MotoCorp is that it can’t use the model Hero Electrical on any of its EVs.
This uncommon scenario arises from 2010, when the Munjals break up the family-owned Hero group into 4. Pawan saved the crown jewel JV Hero Honda (renamed Hero MotoCorp in 2011), whereas Naveen’s household acquired the fitting to make use of Hero Electrical on its firm and merchandise. Naveen claims to have been the driving power within the creation of the household’s Hero Cycles’ first electrical mannequin manner again in 2001 (which was a market flop)—so he can legitimately declare to have pioneered the two-wheeled EV market in India.
One other competitor that Hero should deal with is Ola Electrical, an offshoot of home ride-hailing agency Ola, which has invested $322 million to construct a brand new manufacturing facility in south India with the capability to provide 10 million electrical scooters yearly. After Ola Co-founder Bhavish Aggarwal introduced the launch of the Ola e-scooter on Twitter in July, the corporate clocked 100,000 orders inside 24 hours when the bookings opened.
Hero’s plans to degree the enjoying subject rely closely on the corporate’s Jaipur-based analysis facility, referred to as the World Centre of Innovation and Expertise. It’s right here—and in the same Hero facility in Munich—that Hero’s future in EVs hangs within the steadiness. The sleekly designed complicated, which opened in 2016, is unfold over 250 acres and homes 1,000 engineers, analysis services, an auditorium and testing grounds for normal and electrical fashions. Photo voltaic panels on the roof assist provide electrical energy. “We’re rolling out new merchandise, new applied sciences from this R&D centre,” says Munjal. This facility, provides Munjal, is his “largest, largest delight”.
Hero Xtreme 160R, which has a fuel-injected engine
Coming quickly, Munjal pledges, is the corporate’s first two-wheeled EV, a scooter, which needs to be prepared for an unveiling by March subsequent yr. A one-minute glimpse of what gave the impression to be a prototype of the brand new scooter was proven on the firm’s tenth anniversary ceremony broadcast in August from the Jaipur facility. Saved because the finale of the glitzy hour-long broadcast, Munjal tells viewers that he has a “little shock.” With out revealing any particulars, he stands subsequent to a white scooter that he describes as a “bolt of lightning” and provides: “We’re on the cusp of showing this to the world.”
Whereas nonetheless tightlipped about its options, Munjal does let on throughout his interview with Forbes Asia that the brand new e-scooter will function plug-and-charge expertise. Regardless of being a late entrant into the two-wheeled EV market, Munjal leaves little doubt that the corporate’s future might be electrical. “The way in which ahead not only for us, [but] for your complete world trade is EVs, or related applied sciences,” he says.
The Jaipur facility demonstrates the corporate’s analysis dedication. Inside its gleaming white-clad partitions one can see a motorbike body present process stress exams on a treadmill-like machine that replicates the bumpy situations of India’s potholed roads. Close by an engine is on a steady 200-hour check run to test its sturdiness, whereas on one other platform a motorcycle deal with is being turned back and forth for 150,000 cycles to see if it malfunctions. Outdoors within the shiny daylight, varied check tracks are designed to duplicate India’s myriad highway situations, from easy highways to tough offroad trails.
Apart from in-house analysis, Munjal is constructing Hero’s EV future by means of partnerships. Approach again in 2016, Hero invested in Ather Energy, an Indian e-motorbike firm began in 2013 by two Forbes 30 Below 30 Asia alumni. Hero now has a 35 p.c stake within the agency. Hero and Ather are collaborating to develop a uniform market normal for quick chargers in India, and Hero plans to construct a public charging infrastructure based mostly on the usual. “The concept is to proliferate the infrastructure,” says Munjal.
The World Centre of Innovation and Expertise in Jaipur spreads over 250 acres and homes 1,000 engineers, analysis services, an auditorium and testing grounds for normal and electrical fashions
Picture: Courtesy Hero MotoCorp
One other early partnership to get into EVs in 2012 resulted in failure. Again then, Hero took a 49 p.c stake for $25 million within the US bike agency Erik Buell Racing (EBR), a deal that led to the event of prototypes of two EV scooters and a hydrogen fuel-cell bike. Nevertheless, these efforts fell by the wayside when EBR went bankrupt in 2015.
Hero’s latest partnership that was introduced in April is with Taiwan’s Gogoro, one of many largest battery-swapping suppliers on this planet, and which powers 97 p.c of all of Taiwan’s e-scooters and e-motorbikes. Munjal has mentioned that Hero will pursue a twin monitor of utilizing each battery swapping from Gogoro and common charging in its EVs. He says Hero’s second EV mannequin will use Gogoro’s battery swapping expertise.
“The long run goes to be electrical, collaborative and modular,” Munjal mentioned in the course of the tenth anniversary broadcast. One consider Hero’s favor is its monetary muscle. Armed with greater than $1 billion of money on Hero’s books on the finish of March, Munjal can spend closely to get into the EV market. The corporate’s general numbers this fiscal yr to March have been weakened, nevertheless, by the pandemic’s influence, as web revenue fell 20 p.c to 29 billion rupees on a 6 p.c income progress to 315 billion rupees. The household’s possession in publicly traded Hero and different personal property offers Munjal a web price of $3.eight billion.
Being late to the EV celebration is a problem, says Aditya Makharia, an auto analyst at HDFC Securities in Mumbai, as Hero will solely be one in every of many when it lastly enters the EV market. With Hero Electrical already massive out there, and Ola Electric snapping up orders, Hero MotoCorp might want to carve out its personal identification and market share, he says.
Munjal isn’t any stranger to challenges. He’s the son of the Hero group’s late founder, Brijmohan Lall Munjal, who died in 2015. After the household break up the enterprise in 2010, and parted methods with Honda in its three way partnership, Hero had the fitting to make use of Honda expertise by means of 2015; after that it needed to develop its personal engines and associated applied sciences. The breakup, nevertheless, allowed Hero to ramp up its exports to world markets, which had been restricted by Honda to stop the JV from competing with Honda’s personal gross sales overseas. Munjal admits that Hero has but to “make its mark” in exports—a minuscule Three p.c of the overall 5.eight million items bought within the final fiscal yr have been exported—however he’s aiming to make exports 15 p.c of gross sales by 2025.
The pandemic struck India laborious. Munjal was proactive in combating Covid-19’s outbreak, shutting Hero’s six factories in India and one every in Bangladesh and Colombia days earlier than the federal government imposed one of many world’s strictest lockdowns at four-hour’s discover in March final yr. “You could possibly see what was coming,” he says. Hero staff switched to working from residence, and the corporate began making sanitizers and masks in addition to distributing meals in close by communities. Munjal initiated each day Zoom calls with the management workforce so they may make real-time assessments and, as he describes it, put “lives forward of livelihood.”
Among the many steps taken, the corporate created a Covid-19 zone-mapping dashboard that allowed it to regulate manufacturing ranges relying on an infection patterns round its factories. It additionally developed a system for anticipating provide bottlenecks by pinpointing which distributors have been impacted and which wanted help to convey staff safely again to work. Hero additionally began promoting its two-wheelers on-line.
Hero’s manufacturing facility in Neemrana, Rajasthan
When the Indian authorities started to progressively ease the nationwide lockdown from Might 4, Hero was “able to dash,” says Munjal. Inside six months, it was producing 30,000 autos a day, up from 5,000 in the course of the lockdown. In January this yr, it crossed the 100-million-unit landmark in two-wheeler manufacturing, half of which got here within the final seven years. “They dealt with Covid effectively,” says analyst Makharia. With factories unfold throughout India, Hero was in a position to rapidly modify manufacturing, “typically on an in a single day foundation,” he provides.
In gas-powered autos, Hero stays India’s chief in bikes, however has seen its market share erode in scooters, which declined to 10 p.c within the final fiscal yr from 18 p.c a decade in the past. It additionally has a tiny 5 p.c of the high-end bike market. To achieve share there, Hero tied up late final yr with Harley-Davidson after it exited India following its incapacity to realize a footing by itself out there. Below the deal, Hero turned the unique distributor of Harley-Davidson bikes, components and equipment in India. It would additionally develop and promote a variety of high-end bikes in India below the long-lasting American model. Says analyst Makharia of Hero’s push into the premium finish: “Whether or not they succeed or not is secondary, however at the least their merchandise are up there.”
Waiting for the battle to take pole place within the two-wheeled EV market in India, Munjal says: “There isn’t any enjoyable if there isn’t any competitors, the extra the merrier.”
(This story seems within the 19 November, 2021 concern of Forbes India. You should purchase our pill model from Magzter.com. To go to our Archives, click here.)