Two-wheeler market leader Hero MotoCorp (HMC) is in advanced talks to make a large strategic investment in Altigreen Propulsion Labs, a Bengaluru-based startup that makes electric three-wheelers (E3Ws), paving way for the Pawan Munjal-led firm to enter the fragmented and fast-growing segment, pitting it against Mahindra & Mahindra (M&M) and Bajaj Auto.
Hero is likely to invest up to INR 900 crore for a stake in the 11-year-old company, said people aware of the development. Due diligence has been completed, they said.
If the deal takes place, Altigreen will get a heavyweight investor that can help it scale up fast and make deeper inroads in key markets.
Holds 40% in Ather Energy
Hero MotoCorp gets to diversify into the new mobility segment of e-three wheelers, in which rival Bajaj Auto has a head start and which is led by M&M. An email sent to Hero MotoCorp remained unanswered. Altigreen cofounder Amitabh Saran wasn’t available for comment.
This will be the second large investment by Hero in an electric vehicle (EV) maker, if the transaction goes ahead. It currently holds a 40% stake in IPO-bound electric two-wheeler maker Ather Energy, having invested INR 124 crore in June for an additional 2.2% stake. That funding took place at an inferred valuation of INR 5,636 crore, up from the INR 4,666 crore at which Hero MotoCorp first invested INR 140 crore in December last year.
“Both the listed competitors of Hero MotoCorp—Bajaj Auto and TVS Motor—have a presence in the three-wheeler segment. It makes sense for HMC to enter the segment by riding on the electrification trend,” said an analyst.
Altigreen, which calls itself a technology company, had a turnover of INR 115 crore and sold 2,800 units in FY24. The company has been in talks with Hero for almost six to nine months. So far, between seed and Series A investments, the company has raised USD 56 million (INR 470 crore) at an undisclosed valuation. Series A was led by Sixth Sense and Xponentia and supported by Reliance Industries, Accurant (US) and Momentum (Singapore).
“The companies are moving very fast towards a closure of the deal,” said a person aware of the plans. Altigreen is likely to use the funds to launch new models, enhance its reach and meet profitability goals, the person added. The latest round of equity infusion will set the stage for the company’s next phase of growth, the person added.
The company’s e-cargo three wheelers are aimed at plugging the last-mile gap for ecommerce companies. They are also used to carry vegetables, dairy, poultry, gas cylinders, etc. Altigreen has sold around 5,000 vehicles since it entered the market in 202. In comparison, M&M sells 7,000 units a month, while Bajaj Auto sells 3,500 units a month.
Altigreen is also working on an electric cargo four-wheeler for small, regional routes, Saran told ET previously. It currently has a network of about 30 dealers and plans to take this up to 40 by the end of the year. It has a capacity to make 55,000 vehicles per year, according to its website.
To be sure, owing to a more favorable total cost of ownership (TCO) and government incentives, electrification of three-wheelers used for ferrying passengers and goods over short distances has been more rapid than that of two-wheelers, buses, and cars.
“The TCO benefits are far more attractive in e-three wheelers leading to a rapid electrification,” said Ashim Sharma, senior partner, Nomura Research Institute. “The fact that it doesn’t require a permit unlike ICE (internal combustion engine) has also reduced the entry barrier and led to a spurt in sales.”
Sales of ICE cargo three-wheelers in FY24 amounted to 121,506 and that of auto rickshaws was 511,754, up 33.64% and 61.5%, respectively, according to the Federation of Automobile Dealers’ Associations.
EV penetration in electric autos stood at 11% in FY24 and is expected to reach 50% in FY30. It’s estimated to increase faster in the cargo three-wheeler segment—from 14% in FY24 to 55% in FY30, M&M said in its June quarter investor presentation.
