Hero MotoCorp, country’s largest two-wheeler maker, expects growth in the domestic two-wheeler industry to moderate to high single digits in financial year 2027 after a double-digit expansion last year, with scooters continuing to outpace motorcycles. The outlook comes as the company flagged near-term pressure on its margins from rising commodity, fuel and labour costs.
The automaker’s management said volatility in raw material prices has made the business environment difficult to predict. According to Chief Executive Officer Harshavardhan Chitale, commodity headwinds started emerging in March and are expected to weigh on profitability in the short term, even as demand momentum in the domestic two-wheeler market remains stable.
“As FY27 begins, the broader economy is navigating certain short-term uncertainties due to the developments in West Asia. That has impacted the entire industry in terms of commodity costs, the cost of metals, the cost of gas, or in the recent past, we have also seen an increase in certain labour costs,” he said while speaking to investors on Wednesday.
Hero MotoCorp identified aluminium, steel, rubber and plastics as the key commodities where there is cost inflation, with plastics also getting impacted by elevated crude oil prices. Material cost inflation during the January-March quarter stood at around ₹2,100 per vehicle.
Dealing with rising costs
The company has taken calibrated price hikes across products to partly offset the increase in costs. Chitale said the average increase was close to 2% of the sale price, though he acknowledged that the hikes did not fully offset the rise in input costs.
“The price hike, as of now, does not cover the BOM cost increase fully,” the management said, adding that commodity, labour and fuel cost increases were running in the “high single digits” at the bill-of-materials level.
Despite these headwinds, Hero MotoCorp is stepping up its investments with a planned capital expenditure of over ₹1,500 crore during FY27 as it expands manufacturing capacity in electric vehicles and high-growth scooter segments, while preparing for new product launches across EVs, premium motorcycles and scooters, investments in connected vehicle platforms. Along with this the investment will go into GenAI-led customer interfaces, and low-emission powertrains including flex-fuel options.
“This capital expenditure is going to expand our capacity in scooters, where some of our models are doing very well. We are doubling our capacity,” the automaker’s management said in a post-earnings call on Wednesday.
The company is planning to double its manufacturing capacity of electric two-wheelers at its Sri City plant in Chittoor, Andhra Pradesh, with plans for multiple new electric two-wheeler models under the Vida brand.
“We are investing in capacity expansion. In EVs, in fact, in a matter of a month, we will double our capacity from where we started last year, and then further down the road, there will be further doubling of capacity as we are seeing great momentum for our Vida brand,” the management said.
Hero MotoCorp has already increased the capacity of its Destiny scooter by 50%, while it will be doubling the capacity of its ICE scooter model Zoom. “For EVs, we are close to completing the expansion and will reach 50% more capacity than last quarter within a month. Capacity will increase further in the following months,” the management noted.
Hero’s EV scooter volumes grew 2.5x in FY26, albeit on a lower base, indicating early traction in the segment. The company has recently ramped up its EV manufacturing capacity to 25,000 units per month from 15,000 units.