The country’s largest two-wheeler maker Hero MotoCorp expects the two-wheeler segment to make a strong comeback next financial year with Omicron wave subsiding and a broader economic recovery in sight, according to a senior company official. The company, which reported sales of 12.92 lakh units in the December quarter, also expects the various announcements made in the Union Budget this year to trigger a cycle not only of employment and income but also capex in the private sector.
“As we move forward, let me talk about the demand side, we have seen the GST collections at their almost highest ever at Rs 1.4 lakh crore, we are seeing now pandemic wave in Omicron actually phasing out..all the other sectors which were either stop start or not open fully are now opening,” Hero MotoCorp CFO Niranjan Gupta said in an investor call.
Especially with the opening of colleges, the hospitality sector and the entertainment sector augurs very well as far as the income and rural demand is concerned, he added.
“So, therefore we do expect a much broader economic recovery rather than a shallow recovery as we move forward to fiscal year 2023. We have also seen the budget which is widely focusing on capex expenditure up by 35 per cent over the last year and that would trigger a cycle not only of employment and income but also actually trigger a private capex cycle.
“So, I think combined all of this should have a significant positive impact on the economy in general and the two-wheeler sector in particular,” Gupta said.
He also noted that there is an improvement in the commodity prices which would help in easing cost pressure going ahead.
“As far as cost and margin squeeze is concerned, we have seen a lot of commodities now peaking out, we have seen precious metals, we have seen steel peaking out, and obviously as we move forward we do expect the commodities to have peaked out and therefore the cost pressures to be far less,” Gupta stated.
The company would however continue to take calls on judicious price increases along with the accelerated savings in order to manage the impact on customers as well as on margins, he added.
“So overall when we look at the outlook for fiscal year 2023, we expect strong rebound in the two-wheeler sector and we do expect the cost pressures to ease off in industry as such,” Gupta noted.
He stated that the two wheeler maker would continue to launch more and more products in the premium portfolio to boost its market share.
On the company’s electric vehicle roll out plans, Gupta said the company would eventually cover all segments whether it is premium, mid or mass segment as its objective is to enable electrification for everyone or not just for an exclusive set of people or exclusive set of geographies.
“That is the endeavour that we will have to actually straddle across the segments and accordingly obviously saddle across the geographies as well. Now what pace, what speed, what scale up that is something that we will share closer to the time,” he added.
The company plans to roll out its first EV product in March, Gupta said.
“We continue to invest strongly behind our current investments like Ather and Gogoro..Apart from that we are forging collaboration and partnerships with many players in the ecosystem and therefore we are addressing EV as more of an ecosystem rather than a product or a stream of revenue,” he added.
Hero MotoCorp is set to roll out EV products from its Chittoor, Andhra Pradesh-based manufacturing facility.
The company has also joined hands with Bharat Petroleum Corporation Ltd (BPCL) to set up charging infrastructure for two-wheeled electric vehicles (EVs) across the country.
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In the first phase, charging stations will be set up across nine cities starting with Delhi and Bengaluru. The network will be then expanded across the country with the aim to establish a high density of charging stations, the companies said.
The decline in sales volume in the current financial year is expected on an already-low base after two consecutive years of decline — at 13 per cent in fiscal 2021 and 18 per cent in fiscal 2020, the domestic ratings agency said in a statement.
