Will continue to use Hero brand name for E2Ws: Naveen Munjal, MD of Hero Electric

As per recent Vahan data, your registrations during November stood at 9,003 unit. Is it a matter of concern that your market leadership position has been dented? 

We have been in this space now as a company for 15 years. The reason why we got into electric, why we built it up and the reason we sustained it so long was because of a very strong belief that India has to electrify and switch towards zero-pollution vehicles. Now, the only way that could have worked is if I believed in it.

So what we've been working on is a very long-term vision. It's a very long-term conversion (from petrol–driven two-wheelers) that is happening. While we have strategies which are short term, we look at a long-term perspective. The way that we are looking now is what is going to happen in 10, 15 or 30 years from now and where the market's going to be and what is going to happen and what kind of conversions do we do. We don't really get bogged down if our sales are up or down on a monthly basis.

That's not the way that we function. Our strategy is a much longer-term strategy on 1) How India's going to electrify, 2) how you build that ecosystem around it and, 3) how you as a company maintain that leadership position not just in terms of numbers but also in terms of building an ecosystem.

So when do you expect to regain your market leadership position in the E2W space? 

I can't give you the timeline to say when we will retain market leadership, etc. The kind of plans that you've got right now, so one is the product portfolio. We've already got five platforms and 14 models, which are the widest across the industry. Now we are enhancing that. We are coming out with new models now. After a gap of every three to four months, we are coming out with a new model. Now these products are going to be far more advanced than what is available in the market. So these are going to be cutting edge in terms of technology. They're going to be catering to a segment which is very large.  It may not be cheap, but value-for-money offerings.

What kind of capacities are you building to achieve the same? 

Our Ludhiana plant, which is adjacent to our existing facility, is currently under construction. We have already started production in Mahindra’s plant in Madhya Pradesh. We will be building a 170-acre facility in Rajasthan that will be having a capacity of 2 million units per annum. In the next year-and-a-half, we would have Ludhiana (facility) running, which will start (production) by April ’23 and have an annual capacity of 2.5 lakh units. We would have the plant running in Indore at 2.5 lakh per annum and then the Rajasthan (facility) running by the end of FY 24.  While we are adding 2.5 million units per annum in the medium term, we will also be phasing out production from our first facility at Ludhiana, which has a capacity of 1.2 lakh units per annum.

Since another EV startup is setting up a gigafactory that will be churning out 10 million units per annum, don’t you think you have set a modest target as you need to triple or even quadruple your projected output?  

In a manufacturing setup where you have to build that ecosystem, you have to build the supply chain, the dealer network, get the products out, the service, the manufacturing, the spares availability, and all the other factors that go in with it; it is not that simple. That kind of growth is unprecedented in the automotive space.

So the plan, by no means, is a modest plan. But at the same time, I don't really want to talk numbers which I can't achieve or which are impractical to achieve at this point of time. It also depends on who are we targeting as a consumer, what is the market that you’re trying to convert and how quickly you can convert.

When do you intend to build your batteries in-house like other players? 

There are two parts to it. One is the battery cells and the second is the packaging of those cells. So we have no plans of getting to cell manufacturing. That is best left to specialists, which spend thousands and thousands of crores in a year on R&D (Research and Development) on what the next chemistry is going to be. The second part is that of packaging those cells in your battery pack. That is not a very high-value item. That doesn't give you any tremendous advantage. We've already got very strong partnerships where we are getting companies to package those for us.

We are already developing batteries. So we do the prototyping of batteries, we do batch production of batteries, but we don't get into mass volumes. So we work in a way that we know where our tremendous strengths are. Our strengths are in manufacturing. Our strengths are in coming out with the product which is far superior to anybody else's product in the market at a price point which is acceptable to the customers.

Ola Electric, which is currently dominating the sales charts in the E2W market, has recently introduced an e-scooter at a very attractive price tag to take on ICE (internal combustion engine) vehicles. Do we see a similar strategy by Hero Electric in the future? 

We are at the similar price point of our IC engine vehicle. That has been a conscious effort from our side that a consumer who's buying a petrol-powered product at a certain price point, his stretchability is not too much. And then he has an advantage of TCO (total cost of ownership) i.e. the running cost of the vehicle. So we already have vehicles targeted at the segment that has been our mainstay for the past many years.  But we will never be (selling) the lowest priced scooter as that is not what we are targeting. We want to earn decent margins in order to ensure the products are economically sustainable.

When are you diversifying into electric motorcycles?

Right now, the the scooter form factor is best suited as batteries lose their performance over a period of time. But when you go for a motorcycle, you go more towards performance. Whether that is going to remain in the next three years or four years, that's a different story. There are going to be different forms of vehicles as this market evolves. We have already showcased some vehicles at the Auto Expo (2020) and will launch them when we feel the markets are ready for it.

So what is the proportion of E2W penetration you foresee in the overall two-wheeler market in the medium- to long- term? 

The Indian two-wheeler market, which is going to evolve, will be far faster than what anybody is anticipating. So by 2030, at least 80% of the total two-wheeler sales will be derived from electric vehicles. The point is that we are moving into an era where the vehicles are going to be emission- free. There's going to be no tailpipe emissions.

What were your revenues in FY 22 and the projected revenues and when do you plan to go for an IPO (initial public offering) ?

We will share the revenues later. I don't have a date on the IPO right now. That is something that is going to be determined by various factors like market situation, our advisors’ decision, on the board on what we decide, and at what point the company is ready for an IPO. I can’t give you a timeline right now because I'm not ready for it right now. So when I'm ready for it, I will talk to you about it.

Would you like to comment on the legal tussle you are involved in with Hero MotoCorp? What is the status on the arbitration process? Are you confident of winning it?

Whether I will win or lose is a factor which is determined by the arbitrators. I don't want comment that part of it right now. All I am saying is there is absolutely zero prevention for us to use the brand (Hero) in any manner that we choose to do (whether) it is ‘Hero’ or ‘Hero Electric’. And we continue to market our vehicles under both the brands right now. So we have absolutely, from our side, we have no risk. No other company can use the brand ‘Hero’ in their electric vehicles.

Of late, Hero Electric and other companies were in the news for failing to comply with FAME II (Faster Adoption and Manufacturing of {Hybrid &} Electric Vehicles) subsidy schemes of the government. Would you like to confirm or deny the same?

There is an issue in the industry right now and basis (on) which our industry association Society Of Manufacturers Of Electric Vehicles (SMEV) has already taken up this factor (and) has already made numerous complaints. In fact, I think there's a public notice which stated that there are some complaints being made by these people who don't want the electric vehicle market do really take off. Now who these people are, what their agenda is, we don't know. But they don't want the electrification to happen. So this is an industry issue this is a matter which has been taken up at the highest levels within the government circles by the association. I can tell you that we comply with all standards and all certification procedures.

Battery test standards are going to get more rigorous by April next year. Will that lead to any price hike in your product lines?

It will lead to price hikes for everybody. It will certainly have a commercial impact and there will be a marginal price increase in our products.

What are your views on EV startups which have taken the industry by storm?

A lot of times, there is a misnomer, which is out there, which companies don't realize is that it's an easy product. An electric vehicle is not an easy product. Just because that's having lesser moving parts doesn’t make it easier. Because here now what you go to blend is a mechanical versus electrical, electronics, telematics, IOT (Internet of Things), Battery management System (BMS), battery packs, motors -the combination of it is far more complex than anything else.

It is good startup are coming in. There's a lot of noise in the market out there. That noise helps the market grow, which is a good thing.