We expect 25% growth in export volumes in FY13: Pawan Munjal

Interview with Managing Director & CEO, Hero MotoCorp

After termination of the JV agreement with Honda Motor Corporation, the Munjals’ Hero MotoCorp is looking at scaling up business abroad. Pawan Munjal, MD & CEO, tells Sharmistha Mukherjee the company is firming up distributors abroad and considering assembly bases in some countries to sell a million units outside India by 2017. Edited excerpts:

Hero MotoCorp just announced an investment of Rs 2,575 crore to set up two new manufacturing units. How much of your total production would be earmarked for export?
We will begin exports to Central America and Africa from the next quarter. We are expecting growth of 25 per cent in our export volumes in the current fiscal. All products exported to new markets will be under the ‘Hero’ brand. In the mid-term, we have set a target of achieving a turnover of $10 billion over the next five years. Overall sales should be around 10 million units per annum at the time, 10 per cent of which we expect to come from our international operations.

When you say international operations, do you mean you would look at setting up assembly operations abroad?
There are markets where tax structures are such that you would have to set up a local base to compete with other two-wheeler makers. Brazil is one such place. Other countries where tariff structures require manufacturers to set up assembly operations include Kenya, Nigeria and Colombia. Over the next couple of years, we will look at installing capacity in international markets. That will take us beyond 10 million units.

Will Hero MotoCorp go solo or look at partnerships?
We will like to go with partners for assembly operations, as they would have expertise and knowledge of local markets.

Will your foreign bases act as clusters from where you would distribute products to other countries in the region?
We can have a cluster model where bases in, for example, Kenya or Nigeria can be used to serve markets in West Africa. We are beginning now with CBU (completely built-up units) operations but later on we definitely have plans for CKD (completely knocked down units) or SKD (semi-knocked down units) ventures abroad.

In Africa, we are planning to launch one of our existing products, which will compete with Honda’s low-cost bike.