Hero MotoCorp has been trailing in achieving export targets despite breaking up with Honda ten years ago
Hero MotoCorp, the country's largest two-wheeler maker, is aiming to generate volumes from the African and Asian markets in a bid to ramp up export volumes by five-fold to 1 million units.
A top company executive said that Hero Motocorp will focus on improving volumes from about 40 export markets rather than stretching itself to multiple markets simultaneously.
"The overall market for Hero in 3-4 years will be 10 million and we have a target of 1 million in exports. We are right now at 210,000 a year. It is a stretched target but we are working towards it. The markets that we are targeting are very India-like which has 100cc, 110cc and 125cc," said Rajat Bhargava, head – strategy and performance transformation, global business and emerging mobility, Hero MotoCorp.
Presently less than 3 percent of Hero's volumes come from markets outside of India. This pales in comparison to Bajaj Auto whose 45 percent volumes are export-based and 20 percent of TVS Motor Company. Bajaj exports to more than 70 countries and claims to be in the top two in every country it operates in.
Hero has been trailing in achieving export targets despite breaking up with Honda ten years ago. The break-up of Hero Honda allowed the Indian promoters to step on the gas for exports.
Though Bhargava admits that the target of 1 million is steep the company is confident of achieving it through greater push in Africa which as of now generates six percent of volumes.
"The African journey for Hero started in 2011 after separating from Honda but Bajaj and TVS were already there for nearly two decades. We are present in 9-10 countries in Africa including Nigeria, Uganda, Tanzania, Ethiopia. Until two years ago Africa was not growing because the oil prices crashed and so did the economy. We are progressively introducing products there," added Bhargava.
Hero wants to focus on India-like markets in the first leg of expansion before looking at more developed markets like south east Asia and Europe. Bangladesh, Sri Lanka and Nepal are the countries which have been growing favourably for the country.
"Bangladesh is the largest market for us. We have a joint venture with Niloy group which manufactures motorcycles. Other companies are following suit but none of them have a manufacturing presence. 70-80 percent of the content goes from India and some like seats are locally procured. Bangladesh forms 45 percent of our overseas market," added Bhargava.
Hero's oldest plant is based in Colombia, which was set up in 2015. But volumes from that plant has not been as robust as Bangladesh because of economic downturn in home market and in neighboring countries. Bhargava said volumes in Bangladesh have increased to 1,00,000 units from 50,000 units a year.
In many of the markets where Hero operates the emission standard is much below India’s emission standard. While India will move to BS-VI (only slightly lower than Euro VI) in 2020 some Latin American markets are at Euro II and Euro III.
That is why Hero will keep producing export dedicated models such as Xpulse 200X and Xpulse 200T from its plants in Gurgaon and Daruhera in Haryana. These variants of the Xpulse are not sold in India because they have Euro II or Euro III engines.
"Turkey is Euro-IV which is notch higher than BS IV. Sri Lanka and Bangladesh is Euro 4. Lot of countries in Latin America are not even Euro II or Euro III. We supply BS-III or BS-IV to countries where there is Euro II. They can run on inferior fuel," added Bhargava.
Hero is staying away from the south east Asian markets such as Indonesia, Thailand and Vietnam which are more developed markets. These countries have strong presence of Honda and Yamaha."Some of our competitors tried to succeed in these markets but they could not do that. In the last two, three years these markets went down a lot like Indonesia. These are very mature and developed markets. Between Honda and Yamaha they control 90 percent of the market," said Bhargava.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.