Hero MotoCorp Eyeing Rural Market in India

Hero MotoCorp, India's biggest motorcycle maker, is all set to lure rural buyers with promotions such as free health checkups, to compete with its former partner Honda Motor Co. that prompted the first drop in sales in almost a decade. The company gets over 45 percent of its revenue from sales in non-urban areas in the world's second- largest market for the two wheelers. To get bigger share in rural areas, they are organizing free vehicle servicing and medical camps in over 100,000 villages around the country to bolster its presence and attract new customers, according to Anil Dua, the senior VP for marketing and sales at Hero.

"We've stepped up our engagement with rural India," Dua said in an interview. "The outlook is promising on account of several factors, including rising rural income, better farm output and the government's social spending programs," he said. Hero is planning to improve its presence in the South Asian country's villages and small towns after Tokyo-based Honda's deliveries of scooters and motorcycles jumped 37 per cent in the April-December, compared with a 2 per cent decline for the Indian manufacturer. Honda, which in 2010 walked out of a 26-year partnership with Hero, is targeting a 30 per cent increase in sales to 2.75 million units in the year ending March 31.

Hero is counting on rising incomes in rural areas as farm output is rising and the government is spending on social programs, said Dua. Food grain production climbed to a record 257.4 million metric tons in the year ended June 30, according to the agriculture ministry. Thus the Indian farmers and rural population is also getting more money to spend and Hero is trying to cash this opportunity.

"Honda doesn't have that great a presence in rural areas and a greater rural presence will help Hero mitigate some of the losses in market share in urban areas," said Yaresh Kothari, an analyst at Angel Broking Ltd. in Mumbai. "In the long term, the rural market will grow as the penetration is low and spending levels will increase."

Source: ET