Hero Motors Ltd, the parts making unit of the Hero Group, will lead the group’s foray into four-wheelers, but it will not be a small car, as widely expected, according to its managing director Pankaj Munjal.
“The focus in not passenger cars, but four-wheelers, yes,” said Munjal. “The group has been discussing the project since 1997 what is really the upgrade of a three-wheeler to four wheeler.”
Before starting that project, Hero Motors will start contract assembly of four-wheeled vehicles such as ride-on lawn mower and other off-road vehicles such as golf carts, starting in the middle of 2008. The company is spending Rs200 crore on expanding its manufacturing capacity, which also includes building new factories for making gears and assembling the lawn mowers.
The group will get its technology for the four-wheeler project from a foreign player.
“Technology is not an issue,” said Munjal. “There are lots of technology providers.” He declined to provide details on which companies he is talking with.
The small cargo carrying four-wheeler is the second fastest growing segment in the Indian commercial vehicle market, selling 132,067 units in 200-07, up 64% from a year ago. Growth has been driven by transporters shifting towards a hub-and-spoke model, where such light vehicles are used to carry cargo within cities and heavy vehicles are used between cities. This has prompted companies such as Bajaj Auto Ltd, India’s largest three-wheeler maker, and the local unit of Piaggio SpA to develop models for this segment.
“With such low cost (of manufacturing) and the huge Hero network, it’s a natural progression for us to make four-wheelers,” said Munjal.
It was not clear whether the company would make light trucks or people-carriers.
The $4 billion (Rs16,400 crore) Hero Group manufactures cycles, motorcycles, scooters and components. The group has a 26% stake in Hero Honda Motors Ltd, India’s largest two-wheeler maker.
Hero Motors, which used to manufacture mopeds until a couple of years ago, is now focusing on engineering outsourcing. It manufactures engines for Bombardier’s recreation products (such as water scooters) and is building a factory to make gears for Canada’s Bombardier and bikes from BMW of Germany.