Poor rains have dampened rural bike sales: Pawan Munjal

Interview with Chairman, MD and CEO, Hero MotoCorp

The country's largest two-wheeler maker Hero MotoCorp, like most players, faced a bumpy ride recently due to a stress in rural economy. Pawan Munjal, the company's chairman, managing director and chief executive officer, talks to Ajay Modi and Karan Choudhury about the sector outlook, challenges and Hero's growing focus on expanding scooter share.

What is the outlook for the two-wheeler as well as motorcycle segment this year, given the weakness in the past two years?

In the last couple of quarters the numbers have not been very encouraging for the entire industry. At that level clearly the economy is slow, more so in the rural sector as bad monsoons has really taken a toll. The scooter segment is doing much better than motorcycles, in growth terms, but in the recent past even scooters have slowed down a bit. Thankfully for us, we launched two new scooters last year and have gained a fair amount of market share.

Do you think there should be something in the Budget to give a push to rural consumption?

I would really hope so. The government should give a special focus to the rural sector to improve things.

The Supreme  Court has temporarily banned certain diesel vehicles in markets like Delhi, but the numbers coming out of an IIT-Kanpur study indicate that even two-wheelers are a major contributor to pollution. What is your stand on emission?

We have constantly been in dialogue with the ministries' concerned on emission norms. Clearly, there is lot of pressure from the ministry to revisit the norms but we as a company will work towards the norms that gets finalised by the ministry. There is a lot of work to be done and we have already started doing it. Any tighter norms means you need to put additional devices on the engines, so the costs will go up. Similarly, safety issues surrounding anti-lock braking system (ABS) would add on to costs, especially in the entry-level range  which are bought by common man, it would be very difficult for the consumer to be paying much higher. We are working on reducing these costs at our R&D centre. We will  come forward with the solutions to whatever the government decides.

Whatever is  happening in the rural market in the past few quarters...does that mandate a change in the strategy for a two-wheeler player like you in terms of exploring new segments?

I believe there is tremendous scope in the rural market as the penetration is much lower as compared to its urban counterpart. However, as a nation there is a lot more that needs to be done in the agriculture sector as even after so many years after independence, farmers have to rely on monsoons year after year. Those are the things that need to be done to bring about a change.

What are your growth plans for the scooter segment?

We are continuing to work on a range of scooters and would be unveiling a couple of more products in that range. Work is also going on in the R&D Centre over the current line-up, changes to further boost their sales as well. We are setting ourselves in this direction and we will be doing more work in this area.

There are lot of players getting aggressive in the two wheeler segment. Will you be able to defend your market share?

The reason to come up with new products, new styles, innovations, especially in areas where we are not traditionally strong such as premium segment is to gain and maintain our market share. We are working on products which are being developed completely in-house.

What is  your growth strategy for overseas market?

We have the second plant which is under construction right now in Bangladesh. As soon as it starts production we would be concentrating more  on the South east Asian market. From the Colombia plant that was opened last year we plan to expand presence in neighbouring countries.