Oktoberfest at Hero, firm on road to sell a record 5.8 lakh vehicles

Written by Roudra Bhattacharya | New Delhi | Updated: Oct 17 2013, 21:40pm hrs
Hero MotoCorpHero?s total installed annual capacity is 6.9 million units.
The countrys largest two-wheeler manufacturer, Hero MotoCorp, is on the road to creating history the company is set to post its highest ever sales of 5.8 lakh units in October.

Although auto sales, including those of two-wheelers, have been slow for the past nine months, Hero has managed to cash in on the festive demand. The Delhi-headquartered firm will officially declare its October sales numbers on November 1. The volumes of 5.8-lakh-units will be an increase of around 9% over October last year. Till date, the best ever month for Hero has been May this year when it sold 5.58 lakh vehicles.

All of the companys three plants are working overtime to produce more than the installed capacity the Haridwar plant, which makes the mass- segment Splendor and Passion models, is currently producing about 10,000 a day compared with about 9,000 a few months back. The Dharuhera and Gurgaon plants are both turning out almost 7,000 vehicles daily. Heros total installed annual capacity is 6.9 million units.

Without disclosing the actual sales data, Anil Dua, senior vice-president, marketing and sales at Hero, confirmed that the current month will see record volumes. Dua added that despite rains in Gujarat and the cyclone is Orissa, Navratra (October 5-13) sales at a national level have exceeded expectations. October should be humongous. The best ever month for sales in our history was May 2013 but in October, our target is to exceed that by a good margin. The highest ever retail for the festive season (October and November combined) was 1.1 million units we saw last year. This time we are trying to go far beyond that, I think closer to 1.2 million units. Our factories have been working at full capacity, sometimes beyond that, he said.

The two-wheeler industry has been growing at 2-3% for the last one and half years, and we have been banking on the festive season. The second quarter (July-September) had been down because of rain and the shradh period. But in the third quarter (October-December) we expected a big impact and are clearly witnessing that, Dua added.

A Hero dealer said, The inventory is not as high as the festive season last year, so we need more stocks. As compared to the last six months, sales are up by 19% in the festive season, though compared to the festive period last year I would say it is flat. I expect sales to grow even more during Dhanteras and Diwali.

Higher demand from rural India and festive season stocking has led to a turnaround in motorcycle sales in September with a 17.44% growth to 8.85 lakh units, compared with a 2% drop (41.29 lakh units) in April-August this fiscal. Hero, the market leader with a 44.9% market share in bikes, saw September bikes sales 15% higher at 3.97 lakh units, while rival Bajaj Auto recorded a 2% drop and Honda saw a 40% jump.

Unlike motorcycles, scooters have consistently done well this fiscal. In April-August, scooter segment volumes rose almost 15% to 13.40 lakh units, with September sales jumping 25% to 3.17 lakh units. In September 2013, motorcycles segment volumes expanded in stark contrast to the sluggish growth trends being experienced over the last 18 months. Also, scooter volumes maintained their healthy growth run, an ICRA note said.

Kumar Kandaswami, senior director at Deloitte Touche Tohmatsu India, said that the monsoon has been so strong this year that even if there is lower rainfall next year the dams and irrigation systems have enough water to ensure a good crop. Higher minimum support prices, the food security Bill and NREGS will possibly release 15-20% more cash in the hands of people in rural areas, much of which is likely to help purchases of two-wheelers and other goods. Tractor companies and agro-chemical manufacturers believe that even next years growth is assured due to bumper rainfall this fiscal, he said.

Festive gains

* October sales expected at 5.8 lakh units, breaking previous record of 5.58 lakh units in May 2013

* Production at Haridwar increased to 10,000/day, from below 9.000/day a month ago

* Company expects to create market pull with 15 model upgrades, new ad campaigns

* Hero has seen 7% retail sales growth in April-September FY14; plus strong Navratra volumes