The collaboration between Hero MotoCorp, the world’s largest maker of two-wheelers, and American motorcycle manufacturer Harley-Davidson could manifest in a two-wheeler for the Indian market in the next two years, Niranjan Gupta, CFO, Hero MotoCorp, tells in an analyst call. Hero MotoCorp and Harley-Davidson are jointly developing a platform for two-wheelers, which is expected to bring in volumes and drive profitability in the 160-cc premium motorcycle space.
“Over the next two year’s time frame, you will see models which are in the volume segment and the profitable segment of the premium as well, including the platform that we are developing jointly with Harley,” says Gupta. Harley-Davidson entered the Indian market in 2009, and had a manufacturing facility in Bawal, near Rewari city in Haryana. While it had identified India as a key market, India only accounted for 5% of its global sales. In 2020, as part of a restructuring plan called The Rewire, the company said that it was changing its business model for India. “The company is communicating with its customers in India and will keep them updated on future support. The Harley-Davidson dealer network will continue to serve customers through the contract term,” the company had said in a statement.
Harley-Davidson scaled back its operations in India by signing a licensing agreement with Hero MotoCorp. The agreement, signed in October 2020, gave the Pawan Munjal-led company the right to develop and sell motorcycles under the Harley-Davidson insignia. The agreement also mandated Hero to sell merchandise, riding gear, and apparel through a network of Harley-Davidson dealers and Hero’s existing sales network. Gupta says that the company's parts and merchandise (PAM) business now contributes 13.7% of revenue, and it aims to increase it to 15%. “The PAM business revenue for the first half was at Rs. 2,300 crores, registering a growth of 45%. Beyond the growth prospects in the parts—which is a traditional business—we aim to grow our accessories and merchandise, which have got huge opportunities over the next few quarters,” adds Gupta.
Hero MotoCorp’s stronghold has been the entry-level 100cc-110cc segment, where it claims that the Splendor Plus has outstripped the sales of all its existing models. However, it is keen to build on the premium segment, where it has faced stiff competition from homegrown and foreign players who are jostling for space in a crowded segment. “The jointly developed platform with Harley will be right in the core most profitable segment of the premium and that is in advanced stages,” he adds. Hero also plans to launch new models in the segment every year.
It also has plans to recover the lost market share in the 125cc segment. “The 125cc will be about recovering the lost market share through our actions and the premium will be building the market share to the portfolio we are launching. So those will be the drivers of the market share moving forward over the medium term from a domestic ICE perspective,” explains Gupta. Commenting on the outlook, he believes consumer spending confidence is returning. “When we look at the crop cycle—where the crop harvesting is happening because of delayed rain now; we've looked at the other fundamental factors, and also the GST collections as we know are good—the crop realisations are good. I think it all augurs well.”
Gupta also says the return of growth in developed markets may take a while, but India clearly is relatively much better placed—with a strong consumption base, favourable demographic profile and significant headroom for per capita consumption relative to other countries. “The recent resurgence of spending across categories during the festive season is reflective of the return of consumer confidence and augurs well for the industry growth moving forward,” he adds.
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