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Seeking to diversify, Hero MotoCorp weighs riding into electric three-wheeler market.

Date: 17-08-2020
Subject: Seeking to diversify, Hero MotoCorp weighs riding into electric three-wheeler market
Hero MotoCorp is exploring options in the electric three-wheeler space in an attempt to diversify operations and reduce its dependence on the budget bike segment, comprising the Splendor and Passion.

India’s largest two-wheeler maker, which had a retail market share of 41 percent as of July, said that the three-wheeler segment is one of the areas it is evaluating among emerging mobility opportunities.

“We are evaluating various offerings in emerging mobility opportunities, including two-wheelers and three-wheelers, telematics, charging/ swapping ecosystem and mobility as a service (MaaS)”, Hero MotoCorp said in its annual report.

Having dominated the two-wheeler segment for more than two decades, this is the first time Hero MotoCorp has announced its intention of entering the three-wheeler category. This comes on the back of the company showcasing a concept ‘class changing’ vehicle in February, which can be used interchangeably as both a two-wheeler and a three-wheeler.

“We are not confining ourselves to just the two-wheeler segment in our vision of the future of mobility. We continue to work on other adjacent areas,” added Niranjan Kumar Gupta, CFO, Hero MotoCorp, in a recent analyst call.

The Market

The market for electric three-wheelers grew at double the rate of those powered by petrol, diesel and CNG during FY19, according to data released by the Society of Manufacturers of Electric Vehicles (SMEV). FY20 data for electric three-wheelers was not shared by SMEV.

Sales of electric three-wheelers grew 21 percent in 2018-19 to 630,000 as against 520,000 in 2017-18. In 2018, sales of petrol, diesel and CNG-powered passenger three-wheelers grew just 10.6 percent to 572,400 units, compared to 517,400 units sold in 2017-18, according to data shared by the Society of Indian Automobile Manufacturers (SIAM).

The electric three-wheeler segment is highly unorganised and dominated by cheap imports from China. The GST on electric vehicles, at just 5 percent, is the lowest across the automotive space in India.

Why is Hero entering e-3Ws?

Though Hero has maintained an iron grip over the budget bike segment, despite various attempts it has not made its mark in the premium category (150cc and above) of two-wheelers, which is dominated by Bajaj Auto. Similarly Hero has struggled in the scooter segment, too, which is controlled by Honda Motorcycle and Scooter India.

The company’s supposed entry into the electric three-wheeler space will reduce its dependence on the entry-level bike segment, which accounted for 93 percent of its total domestic volumes, according to SIAM data for FY20. Such budget bikes form the core of its 10-12 percent operating margin, which is much lower than the 16-18 percent enjoyed by rival Bajaj Auto.

Hero MotoCorp has the largest network of touchpoints in the country for any one automotive brand. The company has over 6,000 touchpoints (including dealerships), comprising around 1,000 dealers and service centres across the country. It can tap into this massive pool of retail reach for the electric three-wheelers.

The Competitors

Mumbai-based Mahindra & Mahindra dominates the electric three-wheeler space through its subsidiary Mahindra Electric Mobility. Greaves Cotton-backed Ampere has also entered this segment with the acquisition of a Noida-based firm.

Piaggio, Kinetic Green, Victory Electric Vehicles and a number of small start-ups have ventured into this segment in recent years.

Source:- moneycontrol.com

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