Interview with Anil Dua, Senior Vice-President (Marketing & Sales), Hero MotoCorp

Company Description: Hero MotorCorp Ltd, formerly Hero Honda, is the leading Indian motorcycle and scooter manufacturer based in New Delhi.  The company started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. In 2001, it achieved the coveted position of being the largest two-wheeler manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position to date. In 2010, When Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity.

How has your journey in Hero Motocorp been for you?

I would say it has been a wonderful journey for me. It’s been nearly six years that I have been with Hero MotoCorp (formerly Hero Honda). Since my joining in 2006, there was a significant turn of events that happened along the way. One of them was strengthening our leadership position in the two-wheeler market. This is because there has been intense competition when I had joined. We were selling around 200,000 units a month at that point of time. The second phase involved strengthening our model and corporate brands. The third phase was more into our discussion with Honda. Even we were looking for a future beyond Honda; we were seeking their continuous support. Post our separation with Honda in 2010, we entered the fourth phase when we were looking to take ‘Hero’ to a global platform. We were working on creating a new entity as well as forming a new brand i.e. Hero MotoCorp. We rolled out a brand campaign by the name of ‘Hum Mein Hain Hero’. Now it’s the fifth phase we are going through, which centers on giving more substance and shape to our company. So it’s been 5 phases, in 6 years and the journey for me has been very eventful.

What kind of an alliance are you looking at with Erik Buell Racing (EBR)?  Would it be limited to sourcing engines? Or does it also mean moving up the value chain?

Our alliance with EBR is three-dimensional. Firstly we tied up with them for their technology to develop future models. They are known for their higher displacement bikes, strength in emission norms, light bikes. So these things will help in strengthening our portfolio. Secondly, we wanted to get into racing. Through this alliance, we are sponsoring two teams-Team Hero and AMSOIL Hero - for ‘AMA Pro Racing National Guard Superbikes championship’. Thirdly, we wanted to tap their expertise for our markets outside India.

You have stated that Hero MotoCorp already has an in-house R&D centre.  Could you please tell us as to what kind of activities are carried out here?

Yes, we were already having a R&D centre. Post December 2010, we were strengthening our base further. We are resourcing in terms of manpower, as there is a lot of skilled talent available in the country. We are also working on creating equipment i.e. development and testing equipment. We are also taking quantum leap on capabilities and readiness for future. 

As you intend to maintain your number one position in the domestic market, you obviously need to establish greenfield facilities in the country. So have you zeroed in on any location? If yes, is Gujarat one of them? And do you have any plans to set up a unit abroad?

Currently, we have 3 factories, one each in Gurgaon, Dharuhera, and Haridwar where we have rolled out 5.4-million units last year. At present, we have an installed annual production capacity of 6.15 million units across the three plants. We are stretching that further by April 2012 which will take our annual output to 6.5 million units. This will be sufficient to meet demand for the current financial year as well as the next fiscal (2012-13). We will establish new plants in due course of time. And to facilitate our international business, we may consider building a manufacturing or assembly plant outside India in order to make use of the duty structure prevalent in that country.

Your company’s forte has always been the commuter segment. You have also expanded your presence in the executive segment with the Impulse?  What about the premium segment where you just have the Karizma? Can we expect some more models?

With a company of our size, we protect all flanks. We have a multi-segment approach. We focus on not only motorcycles, but scooters too. The premium segment for us is 150cc segment and above where we have already added the ‘Impulse’. We already have Hunk, CBZ Xtreme, Karizma ZMR in such a segment.

When and where are you planning to export your bikes?  Can you name the countries?

We are already exporting our products to Sri Lanka, South East Asia. Going forward, we have identified three markets of Latin America, Africa and South East Asia.

Pawan Munjal (MD, Hero MotoCorp) had earlier maintained that the company is keen to foray into the entry-level low-cost bike segments. So what is the update on that?

There have been speculative reports on that for quite some time. As I mentioned earlier, we excel in multi-segment approach. Having said that, there is nothing to share on this at this point of time.

It’s a known fact that your agreement with Honda has ensured a steady supply of technological inputs until 2014.  So after that, will you continue to use your flagship brands like the Splendor, Passion, etc?

Yes, the agreement lasts till June, 2014. Splendor, Passion, etc are brands that will remain with us. The only thing that we need to do is drop the ‘Honda’ tag from our models, which we will do eventually.

There was earlier a lot of buzz that Hero Honda, which is now Hero MotoCorp, was keen to roll out a finance arm. As you have undergone the transition, has there been any change in plans?

Our Hero FinCorp (formerly Hero Honda Financial Lease Limited) as the captive financing company for the Hero group. The company provides finance to Hero Honda Motors, and also to the dealers, vendors, suppliers to the vendors, and associates of Hero Honda Motors, through hire purchase financing, leasing, loans, and bills discounting.  We took an assessment that we don’t have to get ourselves into retail financing.  But to facilitate lenient financing to our customers, we have tied up with both regional and national banks. Around 130-odd cooperative, regional and rural banks are there to provide finance to our customers and dealers.

Hero MotoCorp has been regularly sponsoring sports and other events domestically. But as you are taking the brand global, do you have any plans to sponsor international events like the Olympics, Superbowl etc? If yes, could you shed some light on that?

We have a long-standing association with sports such as hockey, golf, cricket, Commonwealth Games 2010, etc.  We have been the FIH partner, and have also allied with ICC and other global bodies. And now we have forayed into the racing arena. But we have not finalised our plans for any global event sponsorship for Olympics, etc.

What has been the response to the Impulse? Are you happy with the way the volumes have been garnered? And when do you intend to launch the Passion Xpro, Maestro and the Ignitor?

We have been extremely thrilled with the response to the Impulse. The volumes garnered have been pretty impressive as we clock four-digit sales a month. We are talking about its off-on road credentials. We educate our customers about the features of the transroader bike.  We have carried out local activities and test drives of the same. As far as our upcoming launches are concerned, we are gearing up to further strengthen our steadily growing presence in the gearless scooter segment with the roll-out of the 110cc masculine scooter ‘Maestro’ (Priced at Rs.44,000/- ex-showroom Delhi). Targeted at the male fraternity, it will be the company’s first scooter under the new ‘Hero’ brand name; will be available at dealerships across the country. Other models such as 125cc Ingnitor, 110cc Passion Xpro et al will be launched during the course of the financial year. Honda (Japan) has provided technology for the bikes

What is your sales target for this financial year? Do you see the volumes being impacted due to the rising input costs, skyrocketing fuel prices and rising interest rates?

Hero MotoCorp sold 5.4 million two-wheelers in 2010-11 and aims to exceed sale of six million units this financial year. A factor such as rising input costs affects all players equally. We would be happier if interest rates are low and there is an easier availability of financing.  The financed bikes, which used to account for 60pc of our total sales, now merely contribute 25 pc of the total pie. And if the fuel costs rise sharply, we are going to benefit as there will be lesser chances of people upgrading from bikes to cars.

Last but not the least, can you share your vision for the company?

We are looking forward to a new entity and avatar.  We will strive to consolidate our number one position in the domestic market. We will also be developing our R&D skills. We will also go global through exports. In 5-6 years of time, we aim to sell a million bikes (every year) in international markets, which will be 10 per cent of our total business. By that time, we are also aiming to record a turnover of US$ 10 billion and cross 10 million units in annual sales.