Hero MotoCorp is losing in slow motion

The world’s biggest motorcycle maker is struggling to shed its high-volume, low-margin image, while investors flock to its nimble rivals.

On the face of it, Hero Motocorp’s well-oiled business machinery doesn’t look as if it is missing a beat. It sells nearly 2 million more two-wheelers of all sorts every year than its nearest local competitor, Honda Motorcycle & Scooter India Pvt. Ltd. It’s easily the leader in motorcycles, which account for two-thirds of the total two-wheeler market. The company makes over Rs 3,000 crore a year in profit, has Rs 4,000 crore in cash and liquid holdings and much more in reserves, and is debt-free. It’s also got the best return on capital employed of any Indian two-wheeler company.

Under the surface, however, the company is in a constant state of churn, which may be what prompted chairman and CEO Pawan Munjal to lay his cards on the table at a meeting with dealers and analysts in February, preempting any negative feedback. Since September 2018, Hero MotoCorp has seen a series of senior management exits. The chief technology officer, Markus Braunsperger, quit after his five-year contract expired in July last year, while the sales head, Sanjay Bhan, resigned in November. The company has seen four sales heads in five years. Two other senior members from the top 10 also left in the past year and several others were re-assigned roles.

Hero’s performance over the past five years or so has also broadly left analysts unimpressed. The company has struggled with a reputation for a lack of technical capability, despite embarking on a big transformation project in 2016, with the Rs 850 crore R&D project setup in Jaipur coming a year later. The idea was to move into the new fast-growing areas of the market—scooters, premium motorcycles and exports—that the company had hitherto ignored. Its efforts have borne little fruit. Hero’s scooter market share has fallen to single digits and its products have had teething technology issues.

Ten years after it broke off its decades-long partnership with Honda, Munjal’s strategy seems to be stuck in time. Sign in to read more.

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Lead photo of Pawan Munjal by Eric Miller for the World Economic Forum, licensed under Creative Commons CC BY-NC-SA 2.0.

Update: An earlier version of this story referred to Kartik Ware as managing editor of BS Motoring instead of Motoring World, the publication's new name since 2014.


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