Hero MotoCorp begins work on high-end bike model

Roll-out of the 250cc bike likely in ’14; model one of the first few to be developed after separation from Honda

Hero MotoCorp Ltd, India’s largest two-wheeler maker, is set to introduce its first indigenously developed high-end motorcycle in 2014 to compete with rivals, including its erstwhile partner Honda Motor Co. Ltd, in the domestic market and enter overseas markets.

The Munjal family-controlled firm has started working on the 250cc sports bike, which is expected to start selling in 2014, according to four people familiar with the development. They declined to be named.

“The product will be well-researched and futuristic in nature,” said one, a person directly involved with the project. “Even as market research is underway, a prototype of the bike is ready. However, it’s subject to alterations as the taste of Indian two-wheeler consumers is expected to change dramatically with the country’s per capita income growing at a rapid pace.”

Hero MotoCorp’s spokesman declined comment.

The plan to introduce the premium motorcycle comes amid Hero MotoCorp’s declining market share in the segment, where the company’s Karizma ZMR competes with Honda’s CBR and Bajaj Auto Ltd’s Pulsar. In the last fiscal, the New Delhi-based Hero’s sales in the 125cc and above segment dropped 2 percentage points to 330,726 units, according to data from the Society of Indian Automobile Manufacturers, or Siam.

The 250cc segment expanded 75% in fiscal ending 2012. The segment is expected to grow 25% to 300,000 units a year over the next five years, as per IIFL Ltd’s estimates.

Honda Motor and the Munjal-owned Hero group separated in December 2010, ending a 26-year-old alliance. Even though a new agreement allows Hero to use Honda’s technology and brand till June 2014, Hero is pursuing an independent strategy in terms of technology and branding.

In February, Hero inked a technology sourcing pact with the US-based motorcycle company Erik Buell Racing.

Hero’s newly created 300-member strong research and development team will be working closely with the engineers from Erik Buell to develop motorcycles.

Erik Buell is expected to provide design inputs while Hero will develop its own engine with the help of Austria-based AVL (Anstalt für Verbrennungskraftmaschinen List).

Members of Hero’s research and development department are in Austria to work with AVL on a number of projects. AVL operates a technical centre in Gurgaon on the outskirts of Delhi as well.

Hero has also brought in designers and engineers from Erik Buell to work at its research centre in Gurgaon.

Hero chief executive Pawan Munjal had said in an interview on 22 February that the company would have multiple partnerships to develop new motorcycles and is looking at specific and niche experts in various areas.

According to a second of the four people familiar with the development, the 250cc bike with the Hero branding will be one of the first few models to be developed by the company after its separation from Honda. A third person said Hero had the prototype of the bike parked on the company’s shop floor in Gurgaon.

The 250cc segment has so far been the stronghold of foreign two-wheeler makers including Yamaha Motor Co., Suzuki Motorcycles, Honda Motorcycles and Kawasaki.

Joseph George, an analyst at domestic brokerage IIFL Ltd, said it will be tough for Hero to create a space for itself in the 95,000 units a year premium bike market (250cc and above) which is dominated by the multinationals.

“A typical premium bike buyer may not opt for a Hero brand,” he said. Even if the move may not be significant for the company in terms of profitability, it will be critical from the point of view of technology and positioning of the brand, according to George.