Hero MotoCorp’s foray into the burgeoning electric two-wheeler space comes amid erosion of its market share, particularly in the scooter category, where competition has raced ahead to push it down to the fourth position.
By the end of August, Hero MotoCorp’s share in the scooter segment dropped to the lowest level even as rivals, including market leader Honda, maintained their stranglehold.
Despite four scooters in the line-up and the biggest distribution and sales network among its peers, Hero’s market share closed at 6.2% by the end of August, which was less than half compared with 13.14% clocked five years ago.
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In comparison, the country’s second largest two-wheeler maker, Honda Motorcycle and Scooter India’s share in the scooter segment stood at 49% by the end of August.
TVS Motor Company’s share was at 24%, while Suzuki Motorcycles share stood at 13% during the same period.
Scooters form a crucial pie in India’s total domestic two-wheeler market. The segment managed to regain its position by the end of August when its share closed at 33% from 30% by the close of FY22 when a little over 4 million units were sold.
With the company entering the electric two-wheeler space with premium products (priced `1.45 lakh and above) under the Vida brand, its market share in the scooter category is expected to remain under pressure. Analysts are not enthused by the pricing strategy adopted by the company.
“High upfront cost of an electric vehicle remains one of the barriers for rapid adoption in the EV segment, which makes Hero MotoCorp’s pricing strategy questionable in our view,” a report from Kotak Institutional Equities said.
A note from Axis Capital said: “Hero’s EV approach leaves a lot to be desired and is a little puzzling in terms of positioning, pricing and distribution.”
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Analysts expect initial volumes of the Hero MotoCorp EV to remain low in comparison to some of its high-volume two-wheelers like Splendor.
“Considering the pricing and launch timeline, we expect Vida V1 to be a low volume product and maintain our estimates for FY23/24,” a note from JM Financial said.
At the time of the Vida model launch, Hero MotoCorp stated its intentions of launching more affordable scooters in the future. However, it did not declare any timeline.
An email sent to the company did not elicit response at the time of publishing this article.
Hero MotoCorp has seen a fall in market share even in the motorcycle segment. From consistently clocking over 50% market share every year, the company closed last financial year with a share of 48% which has remained at the same level by August end.
Its price sensitive segment of entry level motorcycles like Splendor and HF, which make up more than 70% of its total bike sales, have seen price increases of up to 40% in the last few years due to a variety of reasons. Therefore, the overall demand for motorcycles has taken a beating.
“While reasonable valuation provides some absolute downside support, concerns around EV strategy and ability to sustain two-wheeler market share over long term could drive multiple derating,” the Axis Capital note added.
