Hero MotoCorp’s Response to Urban Market Demand Changes
Hero MotoCorp, the leading manufacturer of two-wheelers in India, has expressed optimism about the demand in urban markets despite recent indications of a slowdown. The company’s CEO, Niranjan Gupta, remarked that demand in urban areas has grown disproportionately since the pandemic. The company is not only observing growth but also identifying shifts that could impact their sales strategy moving forward.
Shift in Market Strategy to Encourage Entry-Level Sales
In response to declining sales in certain segments, Hero MotoCorp plans to shift its focus toward entry-level two-wheelers, particularly models that are sub-125cc. Gupta suggested this pivot is necessary to stimulate demand in markets where sales have started to decline. He indicated that the government should also consider lowering the Goods and Services Tax (GST) on these vehicles, highlighting a case for reducing the current tax rate from 28% to 18% for entry-level models.
Comparative Growth: Urban vs. Rural Markets
According to Gupta, urban markets have historically dominated consumption patterns, especially in the aftermath of COVID-19. However, recent trends indicate that rural markets are beginning to recover. Hero MotoCorp’s share of sales in urban areas plummeted from 60% to 47% within a year, suggesting a notable shift in consumer purchasing behavior. Gupta noted that the increased kharif yield, favorable monsoon conditions, and higher minimum support prices are likely to bolster rural demand in the coming quarters, potentially complementing urban consumption rather than competing with it.
Future Market Potential and Economic Growth
Gupta pointed out that rural markets typically take longer to recover but are now displaying signs of resilience. The growth of the overall economy, expected to remain steady at 6-7%, alongside continued infrastructure investments, is anticipated to drive future demand for two-wheelers from both urban and rural consumers. This dual strength could lead to an acceleration of growth in the two-wheeler segment as Hero MotoCorp moves forward.
Electric Vehicles: A New Frontier
Hero MotoCorp is also making strides in the electric vehicle (EV) sector, planning to launch an electric scooter soon. Gupta emphasized the importance of maintaining cost leadership in this rapidly growing market, noting that the company is focused on refining the cost structures of its EV offerings. This proactive approach will be critical, especially considering potential changes to government subsidies in the coming years.
International Expansion and Strategic Development
Apart from domestic production and sales, Hero MotoCorp has identified international expansion as a key growth driver. The company has made significant strides in customizing products to meet varying market demands across different countries and plans to enhance its presence in the top ten international markets. Gupta mentioned that Hero MotoCorp’s global footprint now extends to 48 countries, with a strong focus on markets such as Brazil, the Philippines, Mexico, Colombia, and Bangladesh, where the company has already seen growth in market share.
Conclusion
Hero MotoCorp’s strategy acknowledges the evolving dynamics in consumer demand across urban and rural landscapes. By shifting focus towards entry-level two-wheelers, emphasizing growth in rural markets, and investing in electric vehicle technology, the company aims to secure its market position amid changing consumer behavior. Its intention to expand internationally further demonstrates its commitment to solidifying its presence as a global player in the two-wheeler market.
FAQs
1. What is Hero MotoCorp’s primary focus in response to market demand changes?
Hero MotoCorp is focusing on promoting entry-level two-wheelers to stimulate demand, especially in the declining segments of the market.
2. How has Hero MotoCorp’s sales distribution changed recently?
The company’s share of sales in urban areas decreased from 60% to 47%, indicating a shift towards rural market consumption.
3. What role do economic factors play in Hero MotoCorp’s outlook?
Favorable economic conditions, including higher agricultural yields and minimum support prices, are expected to boost rural demand for two-wheelers over the next several quarters.
4. Is Hero MotoCorp investing in electric vehicles?
Yes, the company is preparing to launch an electric scooter and is also focused on reducing costs associated with electric vehicle production.
5. What are Hero MotoCorp’s international expansion plans?
Hero MotoCorp aims to enhance its market presence in several countries, including Brazil and the Philippines, as part of its growth strategy in the international market.