Hero MotoCorp Ltd will aggressively promote its motorcycles and scooters in at least 50 countries where it has hired distributors, expecting to sell 1 million units overseas by 2016-17.
India’s largest bike maker intends to start exports by the end of this year after ending a partnership with Japan’s Honda Motor Co. Ltd.
“We are looking at Africa and Central America as the new markets in our international business plans,” Anil Dua, senior vice-president (marketing and sales), said in an email. “We have planned market-specific brand-building initiatives in these new markets.”
In March, Hero Investments, the investment arm of the Hero Group, paid Rs.3,842 crore to buy Honda’s 26% stake in Hero Honda Motors Ltd and renamed it Hero MotoCorp.
The firm is likely to spend Rs.50-60 crore on advertising and promotions in the first two years, said two people familiar with the matter who spoke on condition of anonymity. Dua did not comment on the money his firm will spend on marketing and brand-building.
“Hero’s executives have visited these potential markets and have finalized distributors for its products,” said one of the persons cited above. “The company will be exporting some of its low-end 100cc models, which may not require any significant changes.”
In Africa, Hero will compete with Bajaj Auto Ltd. The only Indian motorcycle manufacturer that exports to African markets, Bajaj has a market share of about 30% of the entry-level bike segment in the continent, while Chinese companies have the rest. The African market for two-wheelers is estimated to be 1 million units per year, according to Ernst and Young (E&Y), a consultancy firm.
In Central America, Hero will be pitted directly against its former joint venture partner Honda.
In the last fiscal year, Indian exports of two-wheelers grew 27.13% to 1,947,198 units. The segment is led by domestic motorcycle maker Bajaj Auto, which sent 1,267,648 units overseas, registering a growth of 30.36% from a year ago.
Hero initially wants to create brand awareness, the second person said. “The company will begin with BTL (below the line) promotion and it has identified the spots and locations for the same,” he added.
Below the line marketing refers to efforts of firms to reach and convince consumers directly through mail campaigns, trade shows and catalogues, events, and discounts and promotions, and tends to be less expensive and more focused than traditional advertising.
The company wants to concentrate on foreign markets where it can sell its products in large numbers without making too many changes in the two-wheelers, it said in its annual report. It will use its new logo and will directly compete with its former partner Honda in some locations.
“When you go abroad, you first need to invest in dealer network and brand awareness. In Hero’s case, creating brand awareness is as important as anything else because it can be the world’s largest two-wheeler company by volume, but Hero as a brand is not known,” said Rakesh Batra, national leader of the automotive sector at E&Y.
Hero aims to generate 10% of its total revenue from global markets by 2016-17, which Batra thinks is “achievable”.
“If Bajaj’s exports can contribute more than 30% of its total sales, I see no reason why Hero cannot do it,” he said. “But the key will be how they enter key markets like Brazil where import duties are as high as India.”
The company may, however, take some time to enter South American markets as engines need to be modified to run on gasohol, or petrol blended with ethanol. Brazil is Latin America’s largest two-wheeler market and saw sales of at least 1 million scooters and bikes in 2011.
Most two-wheeler makers in India are in the process of raising capacity in order to make the country their export hub. Mint reported on 13 November that Honda Motorcycle and Scooter India Pvt. Ltd is in talks with the Gujarat government to set up a manufacturing facility to increase export volumes, while Japanese two-wheeler maker India Yamaha Motor Pvt. Ltd wants to make the country an export centre to meet demands in African and Latin American markets. The company has announced a plan to invest Rs.1,500 crore in a factory in Chennai. Gujarat and Tamil Nadu are strategically important for exports due to their proximity to ports.
