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Hero family in spat over electric vehicle ambitions of brands

Hero Electric MD Naveen Munjal says that while the family pact allows them to enter any business segment, there is a strong non-compete clause for brand usage

July 13, 2021 / 10:01 AM IST
Electric Scooter. (Representative Image. Source: ShutterStock)

Electric Scooter. (Representative Image. Source: ShutterStock)

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Tension is brewing in the Munjal family with Naveen and Pawan heading for a confrontation over the use of the Hero brand for electric vehicles.

Naveen Munjal, the managing director of Hero Electric, said he is ready to fight uncle Pawan Munjal-led Hero MotoCorp if it enters the electric two-wheeler space under its namesake brand. The two companies are market leaders in their respective segments.

Hero MotoCorp, the largest manufacturer of two-wheelers in India is readying its entry into the electric two-wheeler space in FY22. Hero Electric, which is the market leader in the electric two-wheeler (E2W) segment is ready to go all out to block Hero MotoCorp’s entry.

Speaking to Moneycontrol Naveen Munjal, Managing Director, Hero Electric said, “We are not worried on that account at all because there is a very clear agreement within the family which happened when we did the restructuring in 2010 on how the brands are going to be used. There was no non-compete (clause) as far as product segments are concerned, which means anybody could get into any segment but there exists a very strong non-compete clause for brand usage.”

In April, Hero MotoCorp joined hands with Taiwan’s Gogoro to develop Hero-branded electric vehicles (EVs) for the Indian market. In addition, Hero MotoCorp has been working independently on EVs at its R&D facilities. The first of Hero MotoCorp’s EVs are set go on sale before March 2022 under the ‘Hero brand’.

“Environmental products, green vehicles and electric vehicles; those remain with us. Should anybody venture into, we will have to take our own necessary steps, whatever that is available to us by law. We are very clear on not just the spirit of the agreement but even the wording of the agreement. There is no ambiguity on it,” Munjal added.

Though Pawan Munjal’s Hero MotoCorp declined to provide details of its product strategy for the future it said ‘it will act based on the legal advice’ available to it.

“There is a family understanding, which everyone in the Munjal family is well aware of, and everything will be done within those parameters of both understanding and agreement. This remains a role model of a family agreement. Hero MotoCorp is well aware of its rights and as always, will continue to act based on the best legal advice. We never comment on speculation either of our business strategy or products that we may launch in the future,” a Hero MotoCorp spokesperson said in an email response.

Hero Electric, which has a market share of about 42 percent, has about 13 products in its portfolio, making it the widest product portfolio among E2W companies. The Delhi-based company has lined up investments of Rs 700 crore over the net 3-4 years to increase its manufacturing capacity to more than 1 million units a year from the current 75,000 units a year.

“It was a surprise to us when Hero MotoCorp announced its plans to come out with electric two-wheelers under the Hero brand. We will take all necessary steps available to us at that point in time should something like that happen. There are no back-channel talks within the family on this,” Naveen Munjal added.

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Swaraj Baggonkar
Swaraj Baggonkar
first published: Jul 13, 2021 10:01 am