Hero MotoCorp (HMCL) is planning to roll out fewer scooters from its plants in the next six months as demand for the gearless vehicles remains low and inventory at dealers is still higher than normal, people aware of the development said. Having failed to capture enough market share even after launching new models, the company is aggressively working on new products to strengthen its presence in the segment and at least three new scooters are at the development stage, to be launched in the next two years, one of the persons said.
“A restructuring exercise is underway where the country’s largest two-wheeler maker would focus primarily on the 125cc segment and the new products will cater to that,” the person mentioned above said. This could also mean that the company may discontinue the existing 100cc Pleasure model and launch it with a higher engine capacity (125cc). Hero had already launched the 110cc Pleasure in May this year. As the demand for scooters remains sluggish for over an year, the company is planning to keep limited inventory in anticipation that volumes may remain subdued till the BS-VI emission norms get implemented in April 2020, the person who did not wish to be identified said.
Dealers FE spoke to said while the motorcycle inventory is down to around 35-40 days due to sharp pickup in sales during the festive season, scooter stocks are still above that. Analysts believe wholesales will remain slow for Hero MotoCorp on inventory de-stocking. “The key worry remains that HMCL plans to reduce inventory to 30 days from 60 days, which could impact wholesales more than retails,” analysts at Nomura said. When contacted, a Hero MotoCorp spokesperson said the information was inaccurate claiming the inventory is down to 30 days. “Thanks to a record retail offtake in the recently concluded festive season, our dealer inventory levels are back to the normal 30-day level — the lowest in the past 24 months,” the spokesperson said.
After the Q2 analyst call on October 23, Sanjay Bhan, head of sales & aftersales at Hero MotoCorp, said the company was comfortable with the stock levels of 45 days but still wants to bring it down to 30 days. “Our intent is to get the inventory down to 30 days because we are into the transition year of BS-VI. We need to be extremely careful to the kind of exposures we have in the market,” Bhan had told analysts. While the overall scooter sales declined 17% y-o-y in the April-September 2019, Hero MotoCorp’s volumes fell by a massive 36% y-o-y, further pulling down the market share to 8% compared to nearly 11% in the year-ago period. This was despite the launch of new scooters — Maestro Edge 125 and Pleasure+ 110 — in May this year and Destini 125 in October 2018.
Bhan earlier admitted that there has been some setbacks in the recent past but the company’s intention is to come back strongly in scooters. “The 125cc is a segment where we have been for just 11 months now. Our aspirations are much higher and subsequently as we move to BS-VI, all of our brands are going to see a massive change,” he said last month. The company claims it retailed almost 50,000 units of 125cc scooters in the festive period even as overall wholesales dipped 18% y-o-y in October, when most of the festivals were celebrated. On discontinuation of the Pleasure 100cc model, the company said, “The Pleasure brand continues to be an important part of our line-up in the domestic as well as global markets.”
Analysts at Edelwiess believe the company is working on upgrading portfolio to revive sales as gaining market share remains a challenge. “Longer-term scope for market share gains remains challenging given weakness in the fast-growing scooter and premium bike segments,” they wrote.