After premium bikes, Hero MotoCorp actively eyeing low-cost segment

A year after dissolving its joint venture with Honda, Hero MotoCorp is actively looking at the low-cost bike segment. This is expected to help the company further consolidate its strong hold in the domestic mass biking segment.

Low-cost bikes are typically targeted at buyers who would like to scale up from mopeds. So, the plan is to reduce prices to the Rs 20,000 —30,000 range (now it starts at Rs 34,500 for Hero's CD Dawn).

“We believe that there is a very large mass of customers in that segment — at the bottom of the pyramid. We're working on trying to come up with something, but it's not easy with the way costs are going up. But, we will have something,” Mr Pawan Munjal, Managing Director and CEO of Hero MotoCorp told Business Line.

“We'll be looking at prices which are much lower than where we currently are, otherwise it makes no sense. The market is for people who don't have any (personal) transport at all.”

Product strategy

In its recently set up R&D facility and along with new technical partners — the US-based EBR, and a rumoured tie-up with Austrian power train expert AVL — the company is working on several new product strategies. Apart from larger engines for high-end models, downsizing engines below its current starting point of 100cc is also being looked at.

Hero's increased interest in the mass segment is underlined by the fact that 88 per cent of its 4.53 million two wheeler sales (April-December 2011) came from the up to 125cc segment.

As this segment represents 70 per cent of total domestic bike sales, Hero commands a 45 per cent market share overall.

“It's easy to make something like a moped, but does that serve your purpose. A moped is not as successful in this country since it is not rugged and sturdy as per the usage our consumers — the kind of loading patterns and driving habits. We have to have a real motorcycle,” Mr Munjal said.

Industry sources said Hero had been eyeing this segment for the past few years but had been constrained from developing new technologies under the terms of its 27-year-old joint venture agreement with Honda.

That partnership formally ended in March last year, paving the way for Hero to set up its own research and development facility and seek fresh alliances.