Hero MotoCorp’s VIDA V1 pricing disappoints but EV investments are heartening

Hero Vida V1's battery is removable and can be charged at home. The company said that the top speed of this e-scooter will be 80 kilometers per hour.

New-Delhi based Hero MotoCorp is the latest in the race to launch an electric vehicle (EV), after Tata Motors’ Tiago EV. The Indian multinational motorcycle and scooter manufacturer launched its e-scooter VIDA V1 on Friday.

The e-scooter is manufactured at Hero MotoCorp’s Garden Factory in Chittoor, Andhra Pradesh. It will first be launched in three cities — Delhi, Bengaluru and Jaipur — and slowly expand to eight more cities. Bookings commenced on October 10 with an initial token amount of Rs 2,499, and deliveries will start from the second week of December 2022 in these three cities.

Vida V1 is available in two variants: V1 Plus for Rs 1,45,000 and V1 Pro for Rs 1,59,000. The price is higher than similar EVs by TVS Motor Company, Ola Electric, Ather Energy and comparable pricing to Bajaj Auto, noted Elara Securities (India).

Analysts are of the view that the e-scooter’s pricing is at a premium compared with Hero MotoCorp’s competitors, as it offers more or less similar features than most feature-rich products currently available in the market.

Multiple brokerage firms have highlighted that the premium pricing could restrict a ramp-up in volumes, but they also believe that the company will eventually have offerings across price points to cater to varied customers.

“It will be difficult to clock sizeable volumes in this domain even in FY24,” said ICICI Securities, while JM Financial Institutional Securities highlighted that the company intends to move down the price ladder and capture other price points with future product offerings.

The two-wheeler maker’s decision to price the product at a premium disappointed, and this was reflected in Monday’s stock movement. Shares of Hero MotoCorp fell 3.5 percent intraday touching a low of Rs 2,533. The scrip settled 1.9 percent lower at Rs 2,573.7 on Monday.

The stock witnessed selling pressure even today (October 11). It was trading 0.4 percent lower at Rs 2,564.4 on the BSE.

What is noteworthy though, is that the company is looking for a bigger pie in the e-2-wheeler space in terms of market share.

Hero MotoCorp’s market share in domestic scooters, currently at 7 percent YTD in FY23, was threatened by EV adoption but some analysts believe that with the debut of the VIDA brand, the e-scooter maker will be in a stronger position to capture a slice of the EV pie without affecting the growth of its motorbike range.

Meanwhile, analysts have pointed out that the e-scooter has some unique offerings such as an assured buyback up to 70 percent of the e-scooter's cost after 16-18 months of ownership, an attractive finance scheme at an interest rate 1.5-2 percent lower, and a three-day trial period for customers.

Read here | How does Hero MotoCorp’s Vida V1 stack up against rivals?

EV tieups and investments: A plus point

Additionally, market participants see strategic alliances and investments in EVs as a strong plus point for Hero MotoCorp.

In January, the world’s largest manufacturer of motorcycles and scooters announced a new investment of up to Rs 420 crore in Ather Energy for joint sourcing.

At the end of September, the bikemaker announced a collaboration and investment of $60 million with California-based Zero Motorcycles for the development of electric motorcycles.

Further, Chairman Pawan Munjal said the company’s next product will be launched in partnership with Taiwanese battery-sharing company Gogoro in FY24.

“The success of EV, Hero-Gogoro launches, and Ather Energy valuation are key monitorables and may affect valuation favourably,” said Elara Capital.

Read here | In Pics | Hero MotoCorp reveals Vida V1 electric scooter, priced Rs 1.45 lakh

Brokerage take

Given the recent correction in stock price, Elara Capital has upgraded its rating on the bikemaker’s stock to ‘buy’ from ‘accumulate’ with an unchanged target price of Rs 3,258.

Motilal Oswal Financial Services believes the stock is currently trading at a valuation 14.3 times its FY24 EPS, which largely factors in negatives such as weak demand, market share loss, and low expectations from EVs. Any demand recovery and reasonable success to the EV launch can be a near-term stock price catalyst.

The brokerage firm prefers Hero MotoCorp in the two-wheeler space as it is a pure play on a demand recovery in the domestic 2-wheeler segment.

Citi sees valuations attractive at the current levels and has maintained its ‘buy’ call on Hero MotoCorp shares given the healthy momentum in premium motorcycles. The foreign brokerage firm has kept its target price at Rs 3,100.

While CLSA believes Vida V1’s pricing is significantly higher than the competitors, it has an ‘outperform’ recommendation on the two-wheeler company’s stock with a target price of Rs 2,962.

“The proof of the pudding would lie in execution, given HMCL’s brand equity in ICE products is diminishing. We expect HMCL to speed up its new product cycle and get it right first time—unlike hits and misses in the past,” warned Nuvama Wealth Management (formerly Edelweiss Securities).

The brokerage firm has a ‘buy’ recommendation on the two-wheeler company’s stock with a target price of Rs 3,179.

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