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Business News/ Companies / News/  Hero MotoCorp’s global plans gets a boost from tie-up with Tiger Woods
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Hero MotoCorp’s global plans gets a boost from tie-up with Tiger Woods

CEO Pawan Munjal wants Hero MotoCorp to go global as he plans for sales in the US and Europe by 2016

Golfer Tiger Woods (right) with Hero MotoCorp’s Pawan Munjal in Orlando, US. Photo: PTI Premium
Golfer Tiger Woods (right) with Hero MotoCorp’s Pawan Munjal in Orlando, US. Photo: PTI

New York: Hero MotoCorp Ltd vice-chairman and managing director Pawan Munjal wants India’s largest motorcycle maker to go global as he plans for sales in the US and Europe by 2016.

A partnership with golfer Tiger Woods announced this week reflects Hero’s effort to raise the profile of a brand with little exposure outside India since the company’s creation 30 years ago. New Delhi-based Hero seeks foreign sales of more than 1 million motorcycles and scooters by decade’s end.

“Hero is very big in India, but as we go out of India into new countries, we are probably little known or unknown," Munjal said on Wednesday in an interview at Bloomberg’s New York headquarters. “In five years, we want to get to 10% of our total sales to come from the global markets."

“To appeal to international buyers, Hero is developing new products including sport bikes and petrol-electric hybrid motorcycles," said Munjal, 59, who plans to enter Europe in 2015 and the US by the following year.

Finding footing in the US may prove difficult. Many domestic customers see motorcycles as lifestyle purchases rather than primary transportation, putting Hero’s smaller bikes at a disadvantage to high-end two-wheelers from companies such as Harley Davidson Inc.

“It’s a very different market. It won’t be easy, but I believe if you can crack this market, in terms of stature, we get to a very different level as a company," Munjal said. “I personally see the US market as a very attractive market, even for our current products. Ours are very utility type of motorcycles, good for delivery, good for college campuses, small business. That’s how it is used back in India."

Branding’s role

Branding is part of Hero’s plan to raise its profile outside India and fuel demand to sustain sales from what Munjal said would be a fivefold increase in the number of factories, to 20 by 2020.

Hero agreed to be the title sponsor of Woods’s World Challenge US PGA Tour event in Windermere, Florida. Last year, Hero took a 49% stake in Erik Buell Racing Llc, a motorcycle maker based in East Troy, Wisconsin.

The Indian company, which traces its roots to a bicycle manufacturer, also may start using a new name to further juice sales. Hero hired Wolff Olins Ltd, a consulting firm based in London, to help decide how best to present its products.

“The Hero, Hero Honda brand is known very much for its highly fuel-efficient bikes, more utility kind of bikes, not sports bikes, not the premium-segment bikes or the lifestyle bikes," Munjal said. “We are still considering what brand we should use."

Honda roots

Hero was formed in 1984 as a joint venture with Honda Motor Co. The Indian company now has about a 40% share of the country’s two-wheeler market, including more than half of all motorcycle sales, according to Kapil Singh, an analyst with Nomura Holdings Inc. in Mumbai.

A nascent recovery in India has buoyed the local market in Asia’s third-largest economy, where two-wheeler purchases outnumber car sales by 6-to-1. Scooters helped drive two-wheeler sales to a 19% gain in August from a year earlier, Singh said in an 11 September report.

Hero has sought to increase sales of scooters, particularly outside urban centers and with women. A “strong brand and distribution network and its higher exposure to rural India has helped the company to maintain its market share," Singh said in a 6 August report. He has a buy rating on the stock.

The shares rose 1.4% on Wednesday to 2,828.70, extending the stock’s gain to 36% this year. That beat the 26% advance for the benchmark S&P BSE Sensex index.

Hero’s targets

Hero seeks to increase two-wheeler sales to 12 million units by 2020 from about 7 million projected this year. Munjal wants revenue from outside India to climb to about 10% of the total in the next few years, from a percentage that is now “too very small to even mention."

Exports accounted for less than 3% of Hero’s volume in July, Nomura’s Singh said. Hero was barred from exporting to most overseas markets for more than two decades under a joint venture with Tokyo-based Honda. The companies agreed in 2010 to end the partnership in part to let Hero broaden its operations.

Over the past 18 months, the company has entered about 20 new markets in Africa, Central America and South America, Munjal said. Hero has started factories in Bangladesh and Colombia, the first outside India. Munjal said he also is considering acquisitions, including a possible deal in Argentina.

“M&A (mergers and acquisitions) in the past has played no role in the company at all," Munjal said. “But now we are open to M&A." Bloomberg

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Published: 18 Sep 2014, 09:46 AM IST
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