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BW Businessworld

Will Munjal Ride Ahead With Hero MotoCorp?

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Ten months after he was elevated to the number 2 position, Pawan Munjal, 60, the third child of Brijmohan Lal, has received the baton from his father to become the chairman of Hero MotoCorp.
Munjal has been steering the company affairs for over a decade now and saw the company through the tough times when in 2010, its Japanese partner, Honda Motorcycles decided to travel solo in the Indian market by selling its 26 per cent share to Hero in Hero Honda Company.
Munjal has proved his mettle by ensuring that the break up with Honda Motorcycles did not result in a fall in the engine quality of the Hero motorcycles, because the Japanese company was responsible for the technology of all the motorcycles under the Hero-Honda brand.
Munjal was quick to understand the need for having technology tie-ups to sustain its future brands and beefed up its R&D by acquiring Erik Buell Racing and Engines Engineering. These acquisitions were made to help Hero MotoCorp to have hands on the talented engineers of these companies who would have helped the Indian motorcycle giant to face the future challenge from Honda Motorcyles. However, the decision went wrong as the company had to write-off its investment worth Rs 155 crore as Erik Buel Racing filed for bankruptcy in the last quarter of FY15.
According to people who have worked with Munjal, the new chairman of the company gives opportunity to youngsters. After technology what matters is the branding of the two-wheelers and youngsters understand the nerve of the market. Before the launch of any new model in the market, Munjal takes inputs from the youngsters in his company from across the board.
Going forward, the largest two-wheeler maker in the country faces tough challenge from Honda. While Hero MotoCorp has maintained its lead in the motorcycle segment, by having over 50 per cent market share,  it seems to have lost out in the new age scooters category. In the scooters segment, Honda Motorcycles dominates the market with 56 per cent of the  market share, while Hero is way behind at 18 per cent market share.
This should be a cause of concern for Munjal as the growth in the scooters segment is outpacing the growth for motorcycles. Share of scooters to overall two wheeler sales have nearly doubled over the last five years and it is expected to move up to 37 per cent in FY18.
Due to bad condition of the rural economy, Hero has a tough year ahead as 46 per cent of its sale comes from the rural consumers. Munjal has set a 50 per cent growth target in exports to offset this situation. The company has already defeated Honda in exporting scooters from India in 2014. Hero MotoCorp’s foray overseas started after its divorce from Honda Motors in 2011. Since then it has ventured into the markets of South America and South-East Asia. Last year it announced construction of overseas assembly plants in Colombia and Bangladesh. Hero MotoCorp also aims to build plants in Argentina and Brazil and start sales in developed markets like Europe and the US by 2016.
There is no doubt that Munjal has the firepower and ideas to lead the company in the face of stiff competition, but he will have to come up with a new range of products in his home country to stay ahead in the market. How he does it, only time will tell.