Demand for vehicles overall continued to remain sluggish for the sixth consecutive month as buyers preferred to stay away from showrooms despite the mouth-watering discounts. But Hero is betting on a turnaround and has lined up investments for not just a new factory but new products in segments which have never clicked for it.
Today's wrap focuses on Hero taking another shot at the premium bike segment. Here is a list of all the important automotive stories that made headlines during the week.
Toyota readies Glaza for June launch
Japanese carmaker, Toyota, recently teased the Indian market with its upcoming hatchback, the Glanza. Touted as a rebadged Baleno, the Glanza is the first child of Toyota and Suzuki's recently formed partnership.
As per the collaboration, Toyota and Suzuki have agreed to share platforms and work together for developing EVs for the international market. While their projects are underway, the Glanza is reportedly on its way to the Indian markets soon
Hero to set up new plant amid sales slump
Hero MotoCorp, the country's largest two-wheeler manufacturer, will infuse Rs 1,500 crore in FY20 for setting up a new factory as well as for upgrading products to meet Bharat Stage VI (BS-VI) emission norms, which will come into effect from April 2020. Capital expenditure (capex) will nearly double as compared to last fiscal's Rs 800 crore.
The Delhi-based manufacturer of Splendor and Passion is setting up a new plant at a time when its peers are initiating production holidays and cutting back on output due to fall in sales for the past two consecutive quarters and higher inventory at dealers end (currently pegged at 50-90 days from 30-45 normally).
Maruti Suzuki may move Brezza production to Toyota
Maruti Suzuki, India's largest carmaker, may completely shift the production of its compact SUV Vitara Brezza to Toyota plants in Karnataka.
If the company goes ahead, this will be the first of its kind move as Maruti has not outsourced the production outside the Suzuki fold till now.
April sales skid for car makers
Automotive companies have begun FY20 on a sour note with a double-digit decline in April sales for four of the top five car manufacturers. The companies collectively sold 214,740 units, 16 percent lower than sales in the same month a year ago.
The car and sports utility vehicle (SUV) making companies that control 80 percent of India's passenger vehicle market blame high insurance costs, tight liquidity and other costs for the consistently poor retail demand.
Hero launches new bikes
The country's largest two-wheeler maker Hero Motocorp on May 1 launched three new premium bikes priced between Rs 94,000 and Rs 1.05 lakh (ex-showroom Delhi), with an eye on a leadership position in the segment.
The 200-cc X Pulse 200T is priced at Rs 94,000, adventure bike X Pulse 200 is tagged at Rs 97,000 and Rs 1.05 lakh (with fuel injection), while the Xtreme 200S is priced at Rs 98,500 (all prices ex-showroom Delhi).
At one go, the two-wheeler market leader launched three new bikes, all in the premium category at prices that are nearly double than its largest-selling motorcycle Splendor.
The launches come despite a chequered past of the Delhi-based company where nearly a dozen models were launched by it in the premium motorcycle segment (150cc and above) over the past two decades.
Consumers rejected these launches repeatedly forcing Hero to stop their production. A 150cc off-roader (a first by Hero) Impulse was axed within three years of its launch.
The concept of off-roading bikes did not exist in India at that time and it is recent that it is picking up. It is mostly the expensive 800-1000cc imported and assembled bikes of Triumph and Ducati that make up the micro off-road bikes segment.
CBZ, CBZ Xtreme, Hunk, Impulse, Achiever, CBZ Star, Xtreme 200R, Xtreme Sports, Karizma, Karizma ZMR are the variety of models that Hero launched to win over the hearts of performance seekers.
However, Bajaj Auto managed to maintain an iron grip over this segment. Launched a full two years after the Hero Honda CBZ the Bajaj Pulsar continues to be the segment leader. Even Honda with its global renowned bike brands like CBR and home-grown ones like Unicorn have failed to dislodge Bajaj.
Hero's decision to go after the premium segment has two reasons. The company acknowledges the fact that the economy segment (100cc) will shrink in the long run. Leaving aside data for last year when Bajaj started selling its 100cc at a loss to gain market share, the budget bike segment has been under duress.
Hero has been known for its fuel-efficient bikes such as Splendor, Passion and HF Deluxe. It is natural for buyers to not associate Hero with power and performance products as Bajaj has already established itself in that category. Hero hopes that its new breed of premium bikes will tide over this perception.
Hero's second reason to chase the premium segment is even more important. Profits are much higher in the premium segment than in the economy. Priced double than the economy bikes premium bikes return an average EBITDA margin of 20 percent.
Such high margins, for instance, allows Bajaj Auto to absorb the loss on budget bikes like CT100 as it sells the Pulsar range at over 20 percent margins.
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