Hero MotoCorp, which is the world’s largest two-wheeler manufacturer by volume, is betting big on the vehicle finance business as a profitability and growth driver, said its CEO.
“Financing (of two-wheelers) is a big growth driver not just now but moving forward, in the next three years, the single biggest driver. While, from the economic point of view, it is a capex spend (by the government), from the industry point of view, it will be financing penetrating down to the lowest strata (of society)," said Niranjan Gupta, CEO, Hero MotoCorp in a post-earnings analyst call.
He said penetration of vehicle financing is becoming increasingly critical, accounting for 60 to 65 percent of sales today, up from 40-45 percent of sales a few quarters back.
“The penetration of financing, in terms of the ease, cost, rate and convenience of financing; we've been working with all the finance players," added Gupta.
Gupta added that Hero MotoCorp has piloted its E-finance platform very recently. That will be scaled up further in FY 2024-25, he said.
“Now, what that does is to aggregate all the financials on one platform, and makes the processing of loads much faster, and very convenient for the customer. So, it's just got piloted, but really scaled up very soon," Gupta added.
At present, 60-65 percent of the OEM’s lineup is financed, and of that, 30 percent is supported by Hero FinCorp, an associate company of Hero MotoCorp and a non-banking financial company (NBFC).
“But clearly, finance is a big driver for the next three years; it's not the ticket price, which plays a big role. It is about the ease of financing or the cost of financing,” affirmed Gupta.
Uptick in volumes
Hero had earlier announced plans to open 500-plus ‘Hero 2.0’ stores and over 100 exclusive premium stores called ‘Premia’. Gupta said that the company has established 300 upgraded stores and will be setting up 100 additional stores by March-end.
Gupta added that it expects the two- wheeler industry to register double-digit growth in revenues during FY24 on the back of a rapid surge in the executive and premium segment motorcycles, heavy capex spending by the government, digital inclusion, and growth in the hospitality industry.
“As far as demand is concerned, the premium (segment) has been in the forefront of growth. Even if you segment 125cc into two (categories), which is the upper premium, and let's say, a non-premium, that's also growing. So, it's not just about the top end of India, which is growing, you can see aspirations of people growing at the bottom of the pyramid. We clearly see the positive signals which are emanating from the rural sector as well. And, and we will see in the coming quarters, growth picking up from that segment," Gupta said
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