Hero MotoCorp chairman Pawan Munjal(Reuben Singh/HT)
Hero MotoCorp chairman Pawan Munjal(Reuben Singh/HT)

Pawan Munjal now has his eyes on premium motorcycles

Munjal is embarking on another mission. This time to make premium bikes, with bigger and more powerful engines. But if entry-level bikes are 65% of the market, why is Munjal looking to make inroads into the premium segment?
By Sunny Sen | Hindustan Times, New Delhi
UPDATED ON JUL 18, 2016 10:52 AM IST

July 14 wasn’t just another Thursday in Pawan Munjal’s life. India’s largest bike maker Hero MotoCorp, controlled by Munjal’s family, launched a motorcycle developed completely in-house — the first time in the company’s 30-year history.

For all these years, Hero’s bikes and scooters rode on Honda’s technology, its erstwhile partner. After 26 years of being in a joint venture — Hero Honda — the companies separated in December 2010. The Splendor iSmart, the 110-cc motorcycle, is a “significant milestone in our solo journey, as all future products will be developed in-house,” says Munjal, the CEO and MD of Hero MotoCorp.

Now, Munjal is embarking on another mission. This time to make premium bikes, with bigger and more powerful engines. For all these years Hero was a leader in entry-level motorcycles — 100-125 cc — with over two-third marketshare.

But if entry-level bikes are 65% of the market, why is Munjal looking to make inroads into the premium segment?

“The Indian market is maturing. Buyers will move to different segments with different engine sizes — towards premium and luxurious bikes,” says Munjal, who carries a rose gold iPhone 6S, loves bright printed shirts and socks, and buys most of his shoes abroad.

Few in the two-wheeler business understand the consumer like Munjal does. After all, Hero looked after Hero Honda’s sales and marketing in the joint venture, and also gave inputs to Honda’s research and development (R&D) team in Japan to makes bikes for India.

Numbers, too, support Munjal’s reading. The 100-125 cc segment grew 3%, between April-June. The 125-150 cc segment grew 64%, 200-250 cc grew 50%, and 250-350 cc (Royal Enfield has a 99% share) grew 40%. The 125-250 cc segment is dominated by Bajaj Auto.

To break away from the 100-125 cc niche, in 2013, Hero bought 50% stake in US-based Erik Buell Racing (EBR), a specialist in heavy-engine racing bikes spun off from a Harley-Davidson owned company.

What happened thereafter was, in Munjal’s words, “unfortunate” — EBR filed for bankruptcy in 2015.

EBR had committed 17 products to Hero. It delivered 12 — bikes which required minor technology upgrades. But there were also five new products. Hero acquired these projects for $2.8 million. The HX250R, a 250-cc sports bike, and Leap, the electric scooter, were nearing completion, but Munjal is now reviewing them.

Meanwhile, “we have built capabilities… We started working on products in those ranges, segments and portfolios at CIT (Hero’s R&D centre near Jaipur),” says Munjal, in his usual calm demeanour.

He has the financial muscle to backup his plans. Hero’s market capitalisation is currently Rs 64,954 crore — that’s more than the gross domestic product (GDP) of Goa and Nagaland put together. In 2014-15, it generated Rs 2,250 crore of cash, and Munjal announced an investment of Rs 3,000 crore for new products.

He hired Markus Braunsperger, the man behind Splendor iSmart, from BMW, as Hero’s chief technology officer. Two new premium products have been developed under his guidance — Xtreme 200S (S stands for sports) and the XF3R. Both these product have new platforms — an industry jargon for the basic structure of a vehicle. Each platform can have two-three motorcycles. “My appointment was not just to look at where we are right now… Eventually people will move from 100-cc bikes to premium ones,” says Braunsperger.

However, this is not the first time that Hero is trying to get a chunk of the premium motorcycle market. It already has six products, but an abysmal 3% marketshare. Some of the bikes will be phased out next year. “We will have new products in the 200-250 cc, and slowly go up to 300 cc and so on,” says Braunsperger.

To help Braunsperger, in June, Munjal appointed Malo Le Masson from Infiniti, Nissan Motor’s premium car brand, to head Hero’s new product planning. Masson is already working on designs for premium bikes. “We will have a family of higher capacity premium motorcycles to balance that side of the portfolio,” he claims.

Munjal also wants to enter the US and European markets, which are dominated by high-end bikes. There is a market for 150-300 cc bikes, used mainly in intra-city commute, waiting to be tapped there, says Braunsperger. EBR was Hero’s distributor is America. Munjal is now contemplating going there all by himself, else, the company will have to look for a new partner.

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