New Delhi: India’s biggest two-wheeler manufacturer, Hero MotoCorp, is looking for inorganic growth to strengthen its electric vehicle (EV) play even as it lines up new launches to expand the current product portfolio. While Hero is a market leader in the ICE segment, its EV strategy has so far been cautious and perhaps signalling that it is open to M&As to fast track EV growth.
According to data from the government’s Vahan portal, Hero sold 17,709 EVs in FY24, averaging about 1475 vehicles a month. Compare this with the performance of its two biggest ICE competitors – TVS Motor Company and Bajaj Auto – which sold over 1.83 lakh and 1.06 lakh EVs in the same period respectively. While Hero is way behind ICE competitors, it also has a foot in the electric two-wheeler (E2w) industry through an over 30% stake in Ather Energy. Ather is a pure-play EV company and rose to become the third biggest player in the domestic market last fiscal, selling over 1.09 lakh vehicles. In other words, Ather was just behind TVS and Bajaj. With this background, it is interesting to see that Hero is open to more M&A activity in the EV space.
To a question on whether Hero’s experience with the Ather investment and the need to acquire new technologies or supply chain heft could push it towards more M&As, CEO Niranjan Gupta told an analyst: “I think the scope for M&A is always there. So our balance sheet is strong, we are always open for acquisitions where it makes strategic sense. And obviously in EV, there may be players, there may be parts of this eco-chain, whether it’s the technology or a capability that is up for grabs or up there which can accelerate our own journey, we are always open for that. There are teams which keep exploring, keep evaluating… open to M&A and that’s what the team keeps working towards while continuing to build organically as well.”Gupta himself is known as the M&A specialist, since he spearheaded the partnership of Hero MotoCorp with Harley Davidson and was earlier the head of strategy and M&A for the company besides being its Chief Financial Officer.
Affordable VIDA
Hero is expanding its VIDA electric portfolio in the first half of this fiscal year by launching scooters for the mid-price and mass segments; till now it was targeting only the premium end of the market. In doing so, it will be following many competitors who have either already launched lower priced/family scooters or are in the process of doing so. E2W market leader OLA has started deliveries of its mass market products under the S1 X range with prices starting at INR 69,999 (ex-showroom). Ather has also launched its daily scooter, and others, including TVS and Bajaj, have also announced lower priced scooters.
A premium electric motorcycle is also on the drawing board of Hero’s engineers.
The company says it is eyeing “significant” growth in its VIDA business through new launches at different price points and also because of planned expansion of the EV sales and distribution network.
In FY24, Hero invested time and funds in setting up charging infrastructure – on its own and in partnership with Ather. So now, it is present in 200 cities and 2500 charging points (own plus through interoperability with Ather’s network). The company is also planning to rationalise costs for EVs. Till last fiscal, EV investments have led to a drag on the Hero MotoCorp overall margins. The company had the overall EBITDA at 15.3% but because of the impact of the spends on EVs at 130 basis points, overall EBITDA fell to 14%.
Hero is confident that the current fiscal and FY26 will be “huge years of growth” for its EV business. Does this optimism include M&As and growth through such activities? Only time will tell.
Swadesh Srivastava, Chief Business Officer of the Emerging Mobility Business Unit, said there were no fixed market share expectations from the EV business this fiscal, but the company was expecting steep growth due to expansion in the VIDA portfolio as well as due to expansion into new geographies.
Besides, the company can now avail itself of the benefits available to it under the Production Linked Incentive (PLI) Scheme of the government for the new VIDA products. This should generate cost savings and improve the drag on overall margins due to EVs.
