Founded in 1956 by Brijmohan Lall Munjal, Hero started as a bicycle manufacturer in India. In 1984, a joint venture between Hero Group and Honda Motor Company of Japan ensued and led to Hero Honda Motors Ltd’s formation. As per the JV agreement, HMC provided technical support to Hero Honda, for which, Hero Honda paid royalty to HMC in return. However, both parties agreed to end the JV in 2011, with HMC exiting from the company by selling their entire stake to Hero Group and Hero Motocorp Limited was formed.
In December 2010, HMC divested its entire stake of 26% in Hero Honda Motors. With effect from April 2011, Hero Honda Motors has been renamed as Hero MotoCorp Ltd (Hero). Despite the separation, Hero’s access to product development and technological support from HMC continued till June 2014 but was terminated thereafter. Currently, Hero has tied up with its overseas partners to develop its technology indigenously. Hero bought 49.2% stake in its US-based technology partner Erik Buell Racing (EBR) for $25 million, in July 2013. Hero also has alliances with Austria-based AVL and Italy-based Engines Engineering for developing in-house capabilities to make its own engines. Further, the company entered into a strategic alliance with Italy-based Magnetti Marelli in 2014-15, to develop and manufacture new-generation fuelling systems.
Today Hero MotoCorp Limited is the largest two-wheeler manufacturer globally and with a 35.8 % domestic market share in two-wheeler market and 52.4% market share in India’s motorcycle market. The company owns five manufacturing facilities in India with 8.9 million vehicles and two overseas manufacturing plants, one in Bangladesh and Columbia. The company plans to build a new manufacturing facility in Chittoor, Andhra Pradesh, with an investment of Rs 1600 Crores and which is expected to drive up the annual production to 11 million units annually. In 2019, Hero sold more than 7.92 million vehicles. As of 2019, India accounted for 97% of its revenue, and only 3% of its revenue came from the overseas market despite having a presence in 40 countries. In contrast, its peers like Bajaj Auto and TVS register 45% and 20% of their overseas market sales. In 2006, the company secured a 108th position in the list published by Forbes of 200 most trusted companies.
Associate Companies
- Hero FinCorp Ltd. (‘HFCL’): HFCL, an associate of Hero Motocorp, was incorporated in 1991. Hero Motocorp holds 41.03% in the equity share capital of HFCL. HFCL is a non-banking finance company engaged in providing financial services, including two-wheeler financing and providing credit to its vendors and suppliers. Over the years, it has added several new products and customers in its portfolio, like SME and commercial loans, loan against property etc.
- Ather Energy Private Ltd. (‘AEL’): AEL is a private limited company, focused on developing, designing and selling premium electric two-wheelers.
- Erik Buell Racing, Inc. (‘EBR’): Hero Motocorp through its subsidiary, HMCL (NA) Inc., has invested in Erik Buell Racing, Inc. (‘EBR’), a Delaware Corporation by subscribing to 49.2% of its equity share capital. EBR has ceased its operations and entered into Assignment for the Benefit of Creditors under Chapter 128 of the Wisconsin Statutes.
Read about Ather Energy in more detail
Market Analysis
India is the second most populated country globally, with a significant segment of people belonging to low or medium-income groups and reliable transportation still a challenge. Due to this, two-wheelers are the most sought after option for short-distance travel in the country. The market is expected to grow at a Compounded Annual Growth Rate of 7.33% and will be selling around 24.89 million units in 2024, which is more than double the units sold in 2011. The growth will be propelled by demand arising majorly from semi-urban and rural markets and a relatively low ownership cost. In FY 2019-20, Hero had an export market share of 5.1%, a marginal decline from 6.3% in 2018-19. Hero is the market leader followed by Honda Motorcycle, Scooter India Pvt Ltd, TVS and Bajaj, to name a few.
4P’s of Marketing
Product Strategy
Hero has a wide range of products (about 25 different models) to cater to different segments. Pleasure was launched specifically for girls and Karizma for young boys who rode a bike for style. Product line and depth are the keys to Hero’s successful stint in the country. In this type of market, product differentiation strategy is crucial. Their products were clustered or grouped based on mileage, style and power. Some of the popular models with very high recall value are Pleasure, Splendor and Karizma. Product innovation and blending technology in the production line have resulted in the superior quality of the product. For instance, the four-stroke technology that increases the vehicle’s fuel efficiency was pioneered by Hero in the country. This technological edge is the result of the partnership Hero inked with Honda. Though the partnership is dissolved the technology developed is still used and is continuously upgraded.
Pricing Strategy
Enjoying a dominant position in price-sensitive Indian markets is impossible without a perfect and competent pricing strategy. Though Hero prices its bikes a little higher than its peers Bajaj and TVS but the value proposition, majorly the fuel efficiency and after-sales service, serves as a rationale for that price.
Place and Distribution Strategy
Hero’s bike and scooters are sold primarily through dealers who own and run the showrooms. It has 6000+ dealerships across the country, which is by far the largest in the automobile market. This vast network of dealers has catalysed reach in the country’s far-flung areas. This network also acts as an absorber for a bit higher prices since some regions are penetrated only by hero and people have little choice. Hero pays a fair margin to its dealers, which results in strong association with the brand.
Promotion and Advertising Strategy
Hero has always been aggressive in its branding and promotional activities with extensive television advertisement being the backbone of Hero’s promotional activities. The products are promoted by famous personalities, Bollywood stars, and cricketers. Cricket players were chosen as brand ambassadors because of their reach and fan base in semi-urban and rural markets, mostly the youngster in the age bracket 25-35 years.
Different models are promoted by various celebrities depending upon the target customers. Alia Bhatt endorsed their scooter Pleasure since the target market was only girls. The tag line “why should boys have all the fun” connected well with the target market customers and gave similar results.
Similarly, the model Karizma was endorsed by Hrithik Roshan as the bike was targeted to the youngster who rode the bike for style and fashion. The tagline “Above All” this essence well, and even the model’s name was carefully handpicked to convey the message subtly
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Hero forayed into the world of racing with Hero Racing to increase the revenues generated from abroad and connect with customers. The company participated in the American Motorcycle Association and sponsored two teams Team Hero and AMSOIL hero.
The way Hero connects with its customers is exemplary. To convey the message of passion, energy and confidence, the company overhauled its logo to a red and black logo which was trendy and vibrant. Hero also released a brand anthem with the tag line “Hum mei hai Hero” composed by legendary composer A.R Rehman. The anthem was launched to connect with viewers emotionally. Most of the TV advertisements by hero reflects the story of a common man’s struggles and how he aces them and comes out as a “hero”. The advertisements are targeted at the common middle-class man with a burning desire to achieve more.
Key/recent developments
In October 2020, Hero Motocorp announced that it would partner with Harley Davidson after the latter announced the discontinuation of sales and manufacturing operations in India in September 2020. As part of the partnership, Hero MotoCorp will develop and sell a range of premium motorcycles under the Harley-Davidson brand name. The company has also agreed to offer for servicing requirements and spare parts for Harley bikes. This step will help HMCL to enter into the premium bike segment.
CSR
- The Company’s Ride Safe program, which has been recognized by the Ministry of Road Transport and Highways of the Government of India
- The Hamari Pari’ (Our Angels) program, which recognizes the ability of girls to become agents of social change, has already benefited over 100,000 adolescent underprivileged girls through financial assistance, motivational sessions, and guidance camps
- The ‘Happy Earth’ program aims to protect, conserve, restore and optimally use environmental resources through various initiatives including tree plantation drives, water conservation programs and conservation of wildlife.
Hero has a perfect mix of marketing components. Still, it remains interesting to see whether it can command a similar position when competition increase and a whole new segment of Electric two-wheelers is about to enter the market with a bang. Hero’s partnership with Ather Energy might give a boost to Hero’s plan to enter into the electric 2-wheeler market in near future.
