Can new launches rev up Hero's revenues?
Hero MotoCorp is looking at new product launches to halt the slide in sales; it reported a 12 per cent year-on-year decline in sales in the month of August.
“New product launches will give the company the advantage,” Pawan Munjal, MD and CEO of Hero, said on Wednesday. The company has lined up Rs 2,000 crore for new projects and facilities for R&D.
“It will give our engineers the space to develop expertise,” he said at the sidelines of a Automotive Component Manufacturers Association (ACMA) meet.
The two-wheeler maker’s June quarter sales fell mainly on account of a drop in rural income and the weak monsoon. Most peers also reported a decline.
Mr Munjal also said the Indian market is changing with a shift in customer preferences, the regulatory environment and the presence of more foreign players.
“The Indian customer is moving from price to value. An increase in the use of electronics in passenger vehicles is an example,” he said.
The regulatory environment is also moving towards fuel efficiency, he added.
Indian suppliers have the opportunity to enter mutually beneficial and strategic relationship as global automakers enter India, Mr Munjal also said. However, he cautioned that uncertain sales and mounting competition could lead to declining market shares.
Hero shares have underperformed those of its rivals like Bajaj Auto because the company is completely dependent on local sales for growth, according to a report by Standard Chartered. While the share price of Bajaj Auto have risen nearly 10 per cent on the BSE in the last three months, that of Hero has declined over 3 per cent over the same period. (Read More)
Analysts have also raised concerns over the two-wheeler maker’s near-term outlook. Credit Suisse recently downgraded two-wheeler maker Hero MotoCorp to ‘neutral’ with a target of Rs. 2,056 per share.