Hero MotoCorp on Global Expansion Spree; Eyeing 50 new markets

Hero MotoCorp is celebrating the sales of 50 million vehicles and on this occasion the manufacturer has made some big announcements. The manufacturer is not only serious for its traditional market India, but also discovering new possibilities in emerging markets like Africa and Latin America. Hero is aiming to launch its products in 50 new markets by 2020 with a target of 20 manufacturing facilities across the globe and an overall annual turnover of Rs 60,000 crore. Hero recently shipped its first shipment to Latin America and now the manufacturer announced to open factories in North and Latin America, and these won't be for assembling instead of these factories will be Hero's first full-fledged manufacturing facilities abroad. "While so far we have set up CKD (completely-knocked down) assembly units in some markets, now we are looking for a very big role in at least three countries. These are Brazil and Colombia in LatAm and Mexico in North America," Pawan Munjal told TOI recently.

While the manufacturer is planning global expansions, their domestic market share is decreasing day by day, but Mr. Pawan Munjal MD & CEO of Hero MotoCorp thinks other wise. "I am confident of not just retaining our leadership, but also of taking our market share to an all-time high by exceeding our previous best," Pawan Munjal told ET in an interaction on Wednesday. "We are sure of gaining market share even beyond 50%, and my confidence stems from all the stuff that we have been doing, in terms of technology, new products, people empowerment and global expansion. At the same time, our focus is also equally on improving margins."

A question is pretty obvious that why Hero wasn't on global front earlier, the reason was that Hero earlier prohibited from making overseas investments as part of the joint venture agreement with erstwhile partner Honda. But after the separation in 2011, Hero launched the global brand in London last year with an announcement to reach 30 new countries, since then the company is taking gradual steps towards generating a substantial portion of sales from exports.

Munjal said the three countries will have full-fledged manufacturing operations where the company will make two-wheelers not only for the respective markets, but also for neighbouring countries. "These will be like manufacturing hubs catering to various regions. The unit in Colombia is expected to come up by the middle of 2014, while the other two will happen a little later. We are doing the home-work for these markets."

After India, Brazilian two-wheeler market is the second largest emerging market with around 15 lakh units annually, while other Latin Americal countries like Colombia at 6 lakh units, Mexico is relatively smaller at 2.2 lakh units is also crucial. Currently a large portion of Hero Moto's sales comes from domestic market and exports has little contribution to it, though Munjal has ambitious plans as he looks at a bigger play in various regions. "Our long-term target is to get at least 10% of our sales from overseas markets."

To boost its sales in domestic markets Hero MotoCorp will launch over a dozen new products, including variants and refreshes, in the fiscal year ending March 2014. Announcing this Pawan Munjal said. "All these will be on existing platforms, while products on new platforms will start coming in from calendar year 2014," he said. To showcase its range of new products and technology, Hero will use the 2014 Delhi Auto Expo as a platform.

As part of its ambitious global expansion plans, the company said it will have six assembly lines spread across three continents by next year. "We will be selling in 50-plus countries by 2020. To top it all, I am talking of an annual turnover of Rs 60,000 crore," Hero MotoCorp Managing Director and CEO Pawan Munjal told reporters here at the company's plant. In the fiscal ended March 31, 2013, the company's turnover was around Rs 24,000 crore, he added.

"Between January and March 2014, we will launch some more additional markets, some in Africa, some in the Caribbean and Central American countries," he said. "I am now looking ahead at 100 million cumulative figure by 2020 with 20 manufacturing facilities across the globe, ," Munjal said, adding the company has entered various global markets, aims to sell around one million units abroad by 2017.

Elaborating the company's plans, Munjal said: "By the year 2020, we will have annual production of 12 million motorcycles and scooters every year. This will come from 20 assembly lines inside the country and outside the country." Hero has already announced two new manufacturing facilities at Neemrana in Rajasthan and in Gujarat, as part of a Rs 2,500 crore investment to hike production and research and development capability.

In the short term, he said it would launch brand Hero in ten more international markets by the end of this year. "And by next year, we will have six assembly lines spread across three continents," Munjal said. He added that the company plans to launch twelve new models in the next two quarters, starting September. "In next two quarters, we plan to offer more than a dozen new products to our customers. We are now ready, we will be up and running from September," Munjal said.

Under the cost rationalisation initiative, to be spread over two and half years, the company is working on further rationalising its material and design costs and cut wastages. "We have undertaken this massive exercise along with McKinsey with strict deadlines to optimise our resources and prune our major items of expenditure like logistics cost and marketing expenses," Munjal added.

Source: ET and TOI