BW Communities

The New Hero In Town

BW Online Bureau Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[When Hero and Honda agreed to part ways after 27 years of partnership,  questions were raised whether Hero could survive on its own. Though Hero has absolutely no R&D of its own, it still is confident about pulling it off. "We will double our sales numbers in 5 years," says Pawan Munjal, MD of the newly unveiled Hero Moto Corp (HMC). He says he is aggressively seeking out partners for technical collaborations and is going to make Hero a global and self reliant corporation. "We were earlier limited in international markets because of the nature of our tie up," says Munjal. HMC has plans to take the number of units sold per year from 5.4 million to 10 million units and will export 10 per cent of the revenues. Currently exports are only 1.5 per cent of the turnover. There are huge tasks ahead of HMC. This week, it flew in 1,200 dealers to London asking them to keep faith in the Hero family. The company has 4,500 dealerships and will add 500 more this year. It is adding two new plants and a parts centre in Rajasthan. The first plant will come up in South India  (location undisclosed) with a capacity to manufacture 750,000 units. This plant will take the total production capacity of the group to 7 million units a year. The Munjals announced that they will be spending more than Rs 4,500 crore to remain number one in the Indian market. But the threat from Honda remains as it still supplies technology to the Hero Group till about 2014. What's more, Honda has already touched the 1.5-million sales mark after just 6 years of operations. It took Hero Honda 27 years to become a large brand, but analysts believe that Honda could in the long run upset Hero by poaching technical staff and dealerships. Closing in is Bajaj which is making inroads in the 100cc segments and with scooterettes, the company sold more than 2 milllion vehicles. Both Honda and Bajaj experienced 35 per cent growth in 2010-11, while Hero grew by only 17 per cent. These numbers have bearing in the long run, if Hero does not close its technical tie ups with firms that can give them great design and engines then its good will with the dealers will be lost. It needs to find great products like the Splendour (which sold more than 1 million units at one point) by itself. "Competition cannot catch us and we are investing in global benchmarks," says Pawan Munjal. Hero has 200 design engineers and is betting on its global technical centre of excellence which is being set up over the next 5 years. Hero had bought out Honda's 50 per cent stake for $851 million ($751 million was raised through debt) routed through an SPV. This debt incidence will not affect HMC's stock performance, but the lack of its own identity could mar its second coming in the short run.