Hero MotoCorp CEO Harshavardhan Chitale: We Still Have Work To Do, But At Least We Have Started

To be frank, nothing really surprised me. The reason is that it wasn't an unknown company. Hero is a brand and a company we grew up with. In 1993, the Hero Honda CD 100 SS was my first motorcycle. I used it till 2006. Even after I started using four-wheelers, I kept it and used to take my first son for rides. I grew up with that brand.

Then I read a lot about it when the separation between Honda and Hero happened, and how this Indian company separated and went on to build its own technology and manufacturing prowess—retaining its number one position. There are very few success stories like this and it was good to see it up close.

When I bought the CD 100, Hero's products were known for mileage and reliability. The campaign in those days used to be, "Fill it, shut it, forget it”. That mileage and reliability, as the core value proposition of our product line, continues to hold.

In every category we're in today—different cc ranges of bikes, different scooters—one defining characteristic is that we are the mileage leader. We're also the most reliable and trusted brand. Those two core parts of our brand promise have continued, and of course, we've added more facets to it over time.

Yes, there's a bit of a conundrum in the fact that our overall market share appears to be declining, and it's important to understand what's happening. If you break the market into segments—commuter motorcycles, premium motorcycles, scooters, EVs, exports—in commuter, we are dominant with 85% share, and we're still growing even on that high base.

But the commuter segment, which used to be the largest part of the two-wheeler industry, hasn't grown as much as some others. Premium motorcycles are growing faster as India gets richer, scooters are growing faster as India urbanises and EVs are growing with the clean-mobility transition; exports have also grown. So, other categories have grown faster than commuter motorcycles.

Interestingly, if you look at our individual share in each of these—commuter, scooters, premium, exports, EVs—we've gained share in every one of them. But our business mix is such that it's very high on a category that's relatively growing slower than the others. And when you do the arithmetic, it appears that in the total, you're losing share.

It's important to disaggregate this: in each category, are we winning? Yes. But we need to win far more in the higher-growth categories to compensate for this mix effect. Over the past couple of quarters, our scooter sales have grown at over 40–50%. Last quarter, ICE [internal combustion engine] scooters grew at 80%. EVs grew 190% last year, and more than 150% in the first quarter this year—we gained 600 basis points of market share in the last year.

In premium, we started small—we launched the X440 with our Harley-Davidson partnership. Within a year of launch in the 400–500cc category, we've reached 25% market share. It's a small part of the market, but it gives us confidence that we can build a great product that gets lapped up. We still have work to do, but at least we have started.

In our international markets, we've grown more than 40% year on year for two consecutive years, and more than 60% in the first quarter of this year. So, we're seeing rapid growth and share gains in each of these areas, even though they're still small in absolute terms—which is why I look at it as glass half full, half empty.

When you're relatively small in a high-growth category and you've started doing well, there's a lot of headroom for growth. I see it as a great opportunity—four growth areas, each with a lot of high growth ahead for many quarters to come. That's the game plan.

We're a big proponent of elect-rification because as a company we're a big proponent of sustain-ability generally. Our approach has been that no single company, focused on just one product, can drive that transition quickly. So, we've taken a multi-vector approach—multiple brands, each focused on different product propositions and go-to-market strategies.

While we've continuously invested in and supported Ather since 2016, we also saw a need for an in-house brand, Vida, and the two have been approached differently. That's helped grow the industry and gain scale—proof of that is that we gained 600 basis points of market share through Vida and another 600 basis points through Ather, without the two cannibalising each other.

Even so, the industry is only at about 10% penetration overall—roughly 25% in scooters and less than 1% in motorcycles. So, there's much more to explore. Hence, this multi-brand, multi-vector approach. Once the industry matures and we're at the high end of the S-curve, we may need a different approach, but at this stage, the strategy is working well.

In fact, if you put Vida and Ather together, we're actually No. 1. Sometimes people report Ather as No. 3 and Vida as No. 4, forgetting that one common group company is behind both.

Ather and Euler are clearly strategic investments. We're not there as a financial investor, even though financially the investment has done very well: our initial ₹1,600cr through early rounds is now worth 10x. 

Wherever we see a possibility of market expansion, without interfering in each other's individual product roadmaps, we collaborate. We haven't done much together on product and technology, but we have on charging infrastructure: between the two of us, we've installed 6,000 fast chargers, created an open standard and 20 other companies have joined, that's a consortium called LEAF. 

As for product development, it's clearly separate, even though those ideas do come up. Since both are ultimately selling into the two-wheeler market, we've kept go-to-market separate to avoid conflict there. 

With Euler, on the other hand, since it's three- and four-wheelers, there's no conflict in the product itself, so we've started exploring go-to-market synergies. We've encouraged Hero dealers to open Euler dealerships too, and around 30 have already done so. 

Zero Motorcycles is a technology partnership. We came together to co-develop products and that work is ongoing. We intend to launch products from that co-development once they're ready.

Our joint venture [JV] with Honda was for motorcycles only. Honda had separate partnerships for scooters. After the separation, we began building our own scooter products and technology, so our entry into scooters is relatively recent. That's partly why we're so dominant in motorcycles but not yet in scooters.

India is urbanising, and urban consumers increasingly want a vehicle with some gender neutrality. For example, the boy of the family, the girl of the family, husband, wife, they all want to be able to ride one vehicle. This has driven scooterisation, and scooters have grown faster than motorcycles in recent years.

A few years back, we decided to pursue our scooter strategy aggressively, starting with brands like the Pleasure, Destiny and Zoom and as we did, we recognised that electrification was happening too, which is why we also launched Vida.

So, in scooters, we're pursuing both ICE and EV simultaneously, adding capacity and expanding our portfolio. For example, we're doubling our ICE scooter capacity this year and tripling our EV scooter capacity.

Even though we were a relatively late entrant, we're rapidly catching up. We've crossed 7% market share in ICE scooters and we're at around 11–12% in EVs under Vida, not counting Ather. We want to be the market leader. So, we need to have a high share in scooters as well.

Right now, I see good growth in ICE across every category. Even in commuter, including the entry-level 100cc segment, we have strong growth in the first quarter. We're seeing even higher growth in ICE scooters and ICE premium motorcycles, alongside EV. So, both will continue to grow, partly because of differing use cases. And rather than betting on a single powertrain, our approach is to do scenario planning and work on all the powertrains that could emerge.

To win in the premium segment, we need to work on all four Ps. First is product, where we need to fill out our full product portfolio. Second is go-to-market: we need premium channels where a premium buyer wants to shop.

Third is service: you can't just say ‘drop the bike off, come back at ten’; a premium buyer needs alerts, guaranteed timelines, maybe a loaner vehicle, a completely different service experience.

Fourth is community: premium is driven a lot by word of mouth rather than advertising alone. Our association with Harley Davidson taught us the value of this. So, we built a community Xclan for our other products.

It's not going to be easy. Sometimes your huge success in one area overshadows the brand in another. So the challenge is making sure our premium brands get seen for things beyond mileage, reliability and affordability, for technology, for coolness, for riding comfort, and building those brand attributes.

It's not done yet, it's work in progress, but our focus is on making the product brands speak louder than the parent brand. The parent brand has its strengths, but it can also get in the way. So we're working on making the product brands stronger, that's exactly what we're doing now.

We've actually created a completely separate go-to-market channel called Premia. We now have 137 Premia outlets; we added 70 last year alone, and we'll add close to a hundred more this year. 

Premia is a dedicated go-to-market channel, similar to what Maruti did with Nexa, a different retail format where only premium products are sold, with a different sales experience and service infrastructure.

On the customer perception problem, it's a journey we'll have to work on. As people visit these new showrooms and have a great product experience, word of mouth will build a community, and it'll grow from there. It won't happen overnight. 

What gives us confidence is that in our export markets, 40% of what we sell is premium products. There, we don't carry the overhang of being the dominant commuter player, and the fact that premium makes up 40% of our export sales tells us these are genuinely great products.

We want to be a market leader that defines the future of mobility. The first part—being the market leader—means we need to maintain a high presence in these higher-growth categories.

Defining the future of mobility means inventing some of the form factors, clean technologies, powertrains and digital connectivity that come into play, and being seen as a leader that brings these forward.

Hence, you saw us introduce a completely new category that didn’t exist anywhere in the world—L2-5, our Surge. It is a convertible electric vehicle that transforms from a two-wheeled scooter into a three-wheeled commercial rickshaw.

Second, in defining the future of mobility, when it comes to electrifying mobility in India, most of us live in apartments and very few on the ground floor. If you're on the first or even the tenth floor, you don't have your own parking spot or charging point. So, where do you charge? 

That's why we were the only company and still are, to offer a removable battery as part of the value proposition. That addresses both range anxiety and access to charging.

Put simply, we want to be a market leader that defines the future of mobility—whether that's in how people commute, in form factors, in powertrains or in digital technologies.

It's a very large industry and any large industry has multiple segments. If one person has to go after all of it, they won't do justice to it because there are simply too many balls in the air. 

That's why there have been leadership hires and announcements; we've organised the company into four business units, each focused on one growth lever.

An India commuter unit, focused on entry-level bikes and scooters; a premium business unit, focused on our premium motorcycles; an emerging mobility unit, focused on EVs; and a global business unit for exports. 

Each has dedicated teams of product planners, R&D, model-line heads and dedicated factories in some cases, essentially to run like a mini company.

That's exactly how we've addressed the concern that this looks too complicated by breaking the challenge into four parts, each with a dedicated team.

I agree we need a stronger contender in the 160cc segment, the Apache space, and in the 350cc segment, the Royal Enfield range. We already have strong products at higher displacements, thanks to Harley-Davidson. But between 160cc and 350cc, there are several categories where we need stronger products. 

The good news is we've been working on them. You'll see several launches this financial year, quite soon. There's one category where we've already tasted success, similar to the X440, adventure bikes, the off-road Xpulse. It's a small category in India right now, but we have almost 40% market share in it. That product is built on our experience in the Dakar Rally, our motorsport team competes there. 

Through our R&D centre in Germany, we learned how to build a bike rugged enough for that environment: the suspension, the ground clearance and that experience shaped this product category. 

It tells us that when we build a great product for a category, we can win in the premium. We've seen that with the X440, 25% share within a year, and with Xpulse, 40% share. We now need to bring that same approach to the other categories and fill out the portfolio and you'll see us do that soon.

First edge is our go-to-market strength—our dealership network, including primary and secondary networks, gives us about 9,000 points of sale. Adding service centres and parts distributors, that's 14,000 points of sale. Definitely the widest go-to-market network in the industry.

There’s something else that I have only fully appreciated after joining: trust and relationships. This company is built on a foundation of trust with its ecosystem, be it suppliers or dealers. 

When Honda and Hero separated, almost all the dealers stayed with Hero, even though they could have gone the other way, especially since Hero no longer had Honda's technology.

As the industry goes through technology transitions—new powertrains, new tech, new regulation, that's exactly when your go-to-market network has to believe in you, has to trust that you'll get it right and invest alongside you. That's unmatched strength number one. 

Then there is service. You can take a Hero bike almost anywhere in India and be confident you'll find service for it. That's not just our own service infrastructure, we also have a fairly large parts business. There are  around 220,000 mechanics and 40,000 parts retailers who service Hero customers.

Third is our overall scale in manufacturing and R&D, which has become a large, well-built machine that stands us in good stead.

As for challenges or opportunities, since that's a nice euphemism in English. First, we need to build stronger positions in these higher-growth segments.

Second, we need to build stronger brand associations for those segments; and third, we're a relatively late entrant in internationalisation. We started exporting about 11–12 years ago, while some others started 25–30 years back, so we're much smaller there than some competitors.

But that's a great opportunity too. Indian brands are seen as premium in many export markets, and wherever we've taken our products, we've seen strong growth.

That was 33 years ago! I owned it till 2006. Among other products, I've also ridden our Vida VX2, and I think it's smooth. I've been using EVs for my personal mobility in cars for the last ten years, so I'm an avid EV user, and I'd love for my two-wheeler to be an EV scooter too. That's Vida.