Hero MotoCorp, the country’s biggest motorcycle maker, is wooing rural buyers with promotions such as free health checkups after competition from former partner Honda Motor Co. prompted the first drop in sales in almost a decade.
The New Delhi-based company, which gets over 45% of its revenue from sales in non-urban areas in the world’s second- largest market for the two wheelers, is organizing free vehicle servicing and medical camps in over 100,000 villages around the country to bolster its presence and attract new customers, according to Anil Dua, the senior VP for marketing and sales at Hero.
“We’ve stepped up our engagement with rural India,” Dua said in an interview. “The outlook is promising on account of several factors, including rising rural income, better farm output and the government’s social spending programs,” he said.
Hero is seeking to fortify its leadership in the South Asian country’s villages and small towns after Tokyo-based Honda’s deliveries of scooters and motorcycles jumped 37% in the April-December, compared with a 2% decline for the Indian manufacturer. Honda, which in 2010 exited a 26-year partnership with Hero, is targeting a 30% increase in sales to 2.75 million units in the year ending March 31.
RECORD WHEAT
Hero is counting on rising incomes in rural areas as farm output picks up and the government spends on social programs, said Dua. Food grain production climbed to a record 257.4 million metric tons in the year ended June 30, according to the agriculture ministry.
Wheat output in India, the world’s second-biggest producer, may reach a record for a seventh year as cold weather boosts yield prospects and record domestic prices spur planting, according to the state-owned Directorate of Wheat Research. Prices in India jumped 29% last year after exports rose and the government increased the minimum price paid to farmers to a record.
India’s rural spending was $67.57 billion between 2009-10 and 2011-12, compared to urban consumption of $53.95 billion in the same period, according to a November 2012 note by India Brand Equity Foundation. Rising incomes and low penetration of consumer durables are the reasons cited for the growth in spending, according to the report.
“Honda doesn’t have that great a presence in rural areas and a greater rural presence will help Hero mitigate some of the losses in market share in urban areas,” said Yaresh Kothari, an analyst at Angel Broking Ltd. in Mumbai. “In the long term, the rural market will grow as the penetration is low and spending levels will increase.”
