Will Hero Electric be third time lucky?

Naveen Munjal, Managing Director, Hero Electric
The government’s renewed push on electric vehicles (EVs) has prompted manufacturers to revisit their business strategy so as to take advantage of the country’s ensuing transition. Hero Electric, in particular, appears well-placed to lead India’s transformation as it actively seeks to learn from its past forays into the EV market.

The company’s earlier trials with EV vehicles, in 2000-01 and 2004-05, haven’t met with much success. The key reasons for this include poorly designed products and the lack of focus on marketing strategy, besides external factors such as currency fluctuations and volatile oil prices that contributed to the eventual collapse of the EV market in 2009.

Hero Electric had entered the EV space with the battery-mounted bicycle which failed to lure buyers. Looking back, Naveen Munjal, managing director, Hero Electric, says, “After our market debut, we realised that when one is looking at the transportation sector, people are aspirational. They do not want to move from one bicycle to another. Rather, they want to graduate from a bicycle to a scooter or bike and eventually a car.”

The next big revelation for the company came on the product front. Its vehicles, powered by a heavy lead-acid battery, had high centre of gravity — its balance point. This didn’t make for a balanced vehicle in terms of the driving experience. On top of this, awareness of the product was low. Customers were confused as to how it functions, how to charge the battery etc., even as lack of marketing focus also did not help.

Having dabbled with the market since 2000-01 and having test marketed technologies and products, Munjal and team once again took the plunge into the EV industry and rolled out its first electric scooter in 2007. Since then, it has been focusing on getting the product form factor right and building a robust dealership network. The company is developing different vehicles taking into consideration various use cases. It is targeting consumers as well as corporate sales. For example, within the consumer segment, some vehicles are designed for family use (mothers going to market) and young drivers in the age-group of 15 to 18 years. At the same time, Hero Electric also has high-speed EVs to compete with bikes and scooters.

Most importantly, all the new launches will be powered by lithium-ion battery that is much lighter than the lead battery. A lighter battery gives the company the leeway to innovate with vehicle design and makes it easy for users to charge the removable battery.

Taking customisation to a new level, the EV manufacturer is offering buyers the option of installing one or two batteries in their vehicle. Vehicles powered by a single battery would run for 60 km per charge whereas those sporting two batteries would run for 130 km per charge.

 
In terms of product offering and pricing, Hero Electric wants to have a play in both the mass market as well as the premium segment. Accordingly, the company’s high-speed vehicles are priced between Rs 34,000 to Rs 48,000. And those powered by lithium-ion battery are priced at Rs 46,000 and go up to Rs 84,000.

In corporate sales, it is looking to grow the e-commerce segment with specifically designed delivery vehicles with back seat raised support for easy driving. According to industry estimates, e-commerce giant Amazon alone plies 60,000 delivery vehicles every day. Most of these are old and polluting vehicles that can be easily replaced by EVs.

Hero Electric is also experimenting with the design of its e-rickshaws for mass commute. It is awaiting government guidelines including type of battery to be used in such vehicles and testing and safety norms before launching e-rickshaws at scale.

The company has launches planned up to 2019 and it is going to roll out two to three models every year.

The country’s largest electric two-wheeler company, Hero Electric has 65 per cent market share. Reportedly, it sold 15,000 units in FY 2017. It aims to sell 25,000 units in FY18, 50,000 units in FY19 and 100,000 units in FY20.

Even as the EV market collapsed, the company kept investing in its distribution network. It has 300 exclusive sales and service outlets, and 500 touch points across India. Over a period of time, it has also moved from a credit- to cash-based model.

Munjal is not wary of the competition, rather he welcomes it. “The competition will help grow the EV pie. Even as our market share will go down, the overall volumes will increase drastically. Also, we have already built our brand. We have a certain level of experience that others don’t.”

There can be no substitute to having a dealership network service centre close to buyers, and Hero Electric has meticulously built one. It has a manufacturing plant in Ludhiana, and is exploring options of setting up a plant in south. It is looking for a large plot close to sea ports which would not only help meet growing domestic demand but also help facilitate EV exports to neighbouring countries.