Hero MotoCorp’s ride into two-wheeler EV market faces family-pact speed bump

A Hero by any other name may not be as appealing. We look at how a family pact is preventing the Pawan Munjal-led Hero MotoCorp from using the famous Hero brand name to launch electric two-wheelers. The pact is proving a dampener as the company gears up to ride into the two-wheeler market on its own

September 10, 2020 / 10:23 AM IST
 
 
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Motorcycle market leader Hero MotoCorp is developing electric two-wheelers at its German tech centre in Munich in close cooperation with a newly opened research and development centre in Jaipur.

A high-powered concept motorcycle called e.US (Electric Ultra Sport) along with electrified drivetrains for ‘affordable’ motorcycle solutions is under development in Munich. This includes innovations on Hero’s existing platforms as well as new ones.

These new battery-powered products are being developed using parts from European suppliers but will be produced in India.

Entry planned

Talking to shareholders at the company’s recently held annual general meeting, Pawan Munjal, Chairman and Managing Director, Hero MotoCorp, said the company is on schedule to enter the electric two-wheeler segment, in a strategy that will be independent of its associate company Ather Energy’s launch of electric scooters.

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“The company is working on different programs in the EV segment. We, at our own R&D centres in Jaipur and in Munich, are developing electric products. We are well on our way to launching electric products — well on time — that we have planned for ourselves. We also are looking out, looking around wherever there are possibilities of bringing in new technologies in the EV segment,” Munjal said.

Hero brand out of bounds

But the Delhi-headquartered company, which controls 40 percent of the Indian two-wheeler market, will find it far from easy to commercially launch electric two-wheelers under its own brand. A family pact between the Munjals is stonewalling Hero MotoCorp’s grand entry into the segment even as its close rivals Bajaj Auto and TVS Motor Company start delivering electric scooters to their customers.

The pact states that the Pawan Munjal-led Hero MotoCorp cannot use the Hero brand name to launch electric two-wheelers.

Hero Electric, the company headed by Pawan’s cousin Naveen Munjal, has the exclusive rights to produce and sell electric two-wheelers under the Hero brand. Hero Electric is also the largest manufacturer of electric two-wheelers in India with an estimated market share of 45 percent, selling more than 50,000 units in FY20, including models such as Photon LP and Optima ER.

“Just as Hero Electric cannot enter the petrol two-wheeler segment, Hero MotoCorp cannot launch electric two-wheelers under the Hero brand because of the family settlement. It can create or use any other brand name it wishes to but not Hero,” said an official at Hero Electric.

“Our internal programme on electric vehicles is progressing as per our plan. We have also made a strategic investment in Ather. We will select the brand names of our internal products closer to the launch. We would not like to comment on that at this stage,” Hero MotoCorp said in response to an email by Moneycontrol seeking clarity.

The Ather way

Bengaluru-based electric vehicle startup Ather Energy has taken big strides over the past two years thanks to its launches and due to the backing of Hero MotoCorp since December 2016. Through a recent infusion of Rs 84 crore into the company, Hero MotoCorp has hiked its stake in Ather to 38.57 percent (34.58 percent on a fully diluted basis) from 35.10 percent (31.27 percent on a fully diluted basis) giving the startup a valuation of Rs 2,100 crore.

Ather’s co-founder Tarun Mehta, however, has maintained that Ather will continue to function independently despite Hero MotoCorp’s significant stake ownership. “Though Hero has a substantial stake in Ather, we have a vision that is distinct from Hero Motocorp. Their product portfolio and brand positioning is different from ours,” Mehta said in an interaction with Moneycontrol.

“We have products in the Rs 1 lakh+ category and you won’t see us getting into the Rs 70,000-80,000 price segments”, Mehta added.

Hero has built an image as a maker of budget bikes such as the Splendor and HF Delux, which are a huge draw in the rural and semi-urban markets. Its efforts at going premium have not borne fruit.

On the other hand Ather is a premium brand, having priced one of its products, the 450X, at double the price of a Splendor. Hero has better prospects at the budget end of the EV market than at the premium end.
Swaraj Baggonkar
first published: Sep 10, 2020 10:23 am

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