Hero MotoCorp aims for more rides with start-ups: Rajat Bhargava

Trends in the automobile industry are changing fast. And, to prepare for such disruptive trends, Hero MotoCorp is planning to partner more start-ups, according to Rajat Bhargava, the company’s head of strategy, performance transformation and global business.

In an interview with Business Standard, Bhargava said this would be in addition to the company’s plan to step up sales in overseas markets.

The engagement with start-ups could be in the form of an investment or collaboration in the area of point-to-point mobility.

Hero already controls a third in Ather Energy, a start-up incubated by Indian Institute of technology, Madras, which plans to launch electric two-wheelers.
 

In July 2016, Pawan Munjal, chairman, Hero MotoCorp, had invested in a bike taxi aggregator called Rapido in his personal capacity.

“We will keep on looking at the start-up space,” Bhargava said. The company is keen on getting into a segment that is adjacent to its core business. Bhargava refused to comment on whether Hero has something on its radar for the immediate future.

Elaborating on Hero’s 18-month investment in Ather, Bhargava said Ather continues to work like a start-up. Besides being an investor, Hero advises the Tiger Global-backed firm on customer and consumer understanding, cost optimisation, etc. “It’s for them to run and execute,” he said. Hero had invested Rs 2.05 billion for a 30 per cent stake in Ather. The Chennai-based firm plans to launch S 340, an e-scooter, later this year.

Akin to information technology, there will be multiple players in the electric vehicle segment, too, with unique formulae to success. “There will be space for everyone,” Bhargava said. Hero is also working independently on electric scooters and electric motorcycles.

Citing an instance of innovation, he said the company had experimented with selling vehicles through mechanics in Nigeria. Most of the two-wheelers in that region sell as taxis and come to the mechanics owing to high usage. The mechanics, therefore, wield lot of influence in purchase decisions.

On Hero’s sales outside India, Bhargava said though the company was a late entrant when compared with Bajaj Auto and TVS Motors, it was satisfied with the progress.

Albeit on a small base, Hero has grown more than 100 per cent in the first 10 months of this financial year in regions including South Asia, Africa, Columbia and Central American cluster, he said.

Penetrating deeper into markets where it is present instead of entering new ones will underpin the company’s global strategy. Sales from outside India account for 5 per cent in Hero’s sales turnover currently. The company plans to take it up to 10 per cent. Hero sells its bikes and scooters in 36 countries now with an average market share of 5 per cent.

"There is enough headroom for us to grow in markets where we have 2-5 per cent share,” said Bhargava. It has been using innovations across its functions for greater sales traction.

"We are a start-up in the business. We know that we cannot win that battle if we purely go by the rules of the game. We have to keep on pushing the innovation agenda. We can’t do what we or rivals do in India,” said Bhargava, referring to overseas sales.

Nitesh Sharma, an analyst at Phillip Capital, said: “Hero has opportunity to make it big in disruptive trends like shared, connected or electric vehicles, given the scale and brand appeal. Most of the start-ups that have mushroomed will not have the financial muscle of a Hero and will be up for grabs when they are unable to scale up."

But getting a sizeable volume in countries outside India will be an uphill task owing to strong competition from Indian as well as Chinese rivals, Sharma said. “We aren’t very optimistic on exports."