Hero Moto Corp Analysis

Executive Summary

As per survey of a UN State of world population, urbanisation in India is going to grow to 40.76% by 2030 & as per World Bank by 2050, India along with China and Indonesia will lead the surge in urban population. With that context in mind transportation will be one of the key areas to focus for development of India. So automobile will become the pivot sector for the turnaround of Indian Economy. At present, aggregators like Uber and OLA have already disrupted the Indian passenger car sector. Trend has changed from people owing vehicles to sharing them to travel.

We have analysed the Theme B from HERO’s point of view. Since it is dominant in the two wheeler segment of the Indian automobile market. We have captured trends for the automobile sector in general and two wheeler in detail to understand the market. Then we have devised plan for Hero to convert the threat of aggregators or shared services into opportunities which can be leveraged for future growth. The future of mobility is sharing as one would like hassle free and less time consuming travel with no ownership cost. Person would like to pay only for the travel and would like to have services of the best quality. This would involve upgradation in skillset, technology and overall understanding of the market on the part of the service provider.

Hero can thus enter into the service provider scheme of things & with a strong base of vehicles already present, it can tie up or start its own service & sharing model to expand the reach. This can one of the best solution to stay ahead in the competition. With the central theme of sharing & servicing of two wheelers in mind we have devised strategy for Hero with timelines and financials to capture the growing market.

The technological impact can never be left behind, it will also be the driver of change, mobile services, e-vehicles will also create a market for themselves and thus the analysis cannot be completely in isolation to the above changes. We have though focussed more on the urbanisation and sharing perspective but have devised some strategies using mobile platforms for better implementation.

Table of Contents

1. Automobile Sector Overview………………………………………………………………………………1

2. Future Projections………………………………………………………………………………………………2

3. Two Wheeler Industry Overview…………………………………………………………………………3

4. SWOT Analysis for Two Wheelers……………………………………………………………………….4

5. Strategy for Hero to mitigate risk of aggregators………………………………………………..8

6. References…………………………………………………………………………………………………………12

1.Automobile Sector

The importance of the automobile industry to the national economy can be seen by way of the size of its turnover compared to India’s GDP and contribution across several other parameters:

• 7.1% of India’s GDP

• 27% of India’s industrial GDP

• 4.3% of overall exports (second only to textiles & handicrafts)

• 13% of excise revenues

• Incremental employment generation in excess of 19 million since FY06

• Total investment in excess of US$ 35 billion of which US$ 24 billion is contributed by automobile

• US$ 11 billion is contributed by automotive component companies

• 8% of the country’s R&D expenditure

• Improvement in fuel efficiency of passenger vehicles resulting in fuel savings of 8.6 billion litres between FY06 and FY14

Other Key Factors

• Improvement in fuel efficiency of passenger vehicles resulting in fuel savings of 8.6 billion litres between FY06 and FY14

• Recent budget is more aimed at increasing agricultural income and rural economy. It is very important as 68% of country lives in rural India and employs about 55% of country’s labour force

• Rural wage growth has declined from an annual average rate of 15% between FY09 and FY14 to only 5% over past two years.

• Inflation may increase with GST passed and it may again lead to lower investments and lower consumption, specially discretionary

• Commodity prices may spike up pretty fast because supply lags demand

2.The Future Projections

2015 2020

2015 2020

2015 2020

2015 2020

2015 2020

2015 2020

2015 2020

3.Two-Wheeler Overview

• According to industry body, the Society of Indian Automobile Manufacturers (SIAM), the Indian two-wheeler industry is expected to post an annual growth of 11-12 per cent, and the market is expected to double every four years till 2020 due to surge in

• Disposable and farm income