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Business News/ Companies / News/  Hero likely to miss export target due to Brazil delay
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Hero likely to miss export target due to Brazil delay

EBR's bankruptcy, stagnant global economy likely to add to troubles; Pawan Munjal says firm will evaluate the situation at its next business review meeting

Hero MotoCorp chairman Pawan Munjal (right) with actor Ranbir Kapoor at Auto Expo 2016 in Greater Noida. Photo: HTPremium
Hero MotoCorp chairman Pawan Munjal (right) with actor Ranbir Kapoor at Auto Expo 2016 in Greater Noida. Photo: HT

New Delhi: India’s largest two-wheeler maker Hero MotoCorp Ltd is likely to cut its projections for exports.

The firm’s entry into Brazil, where it expected to sell up to 300,000 units a year, has got delayed, said two people familiar with the development.

Other factors that have hurt Hero’s prospects include the bankruptcy of its technology partner Erik Buell Racing (EBR) and stagnant global economy.

In 2012, Hero had announced that it was looking at a $10 billion sales in five years with total sales of 10 million units, out of which 10% was to come from exports. Later, in 2014, it revised its projections upwards to sell 12 million units by 2020 without disclosing export targets.

“Initial guidance of exports of 1 million units will be downgraded largely due to delay in Hero’s plans to enter the Brazilian market," said a person close to the development.

Brazil is the largest Latin American market and also technically different from other markets as it uses a large share of ethanol in fuel. Hero was seeking help of Austrian engine maker AVL List GmBH to modify its engines for such fuel. It was not clear if the exercise has been carried out.

Pawan Munjal, chairman, chief executive and managing director of Hero MotoCorp, said his company will evaluate the situation at its next business review meeting.

“We will be doing our evaluation across the globe and our business plan. I am sure we will look into that," Munjal said in an interview on Wednesday. “It is not up to me to say. The team will have to come up with projections."

To serve Brazil and other markets in that region, Hero is setting up a manufacturing plant in Columbia. The plant will supply products to neighbouring countries such as Peru, Ecuador and Chile, and Central America.

Hero MotoCorp also has presence in markets including Peru, Columbia and Guatemala.

However, Munjal added that his firm may still be able to achieve its domestic sales target, which is 9 million units by 2017. “I think there is still some time to go. We have capacities in place. We will push for that. As I said, at least in the Indian market, the conditions should improve," he said.

“On the export front, we are expanding our markets too," he added. Hero plans to enter 50 markets by 2020.

Consumers, especially those in rural areas suffering from two consecutive monsoon failures, do not have enough money to spare, Munjal said.

“Sentiment itself is not very great. My understanding is that a lot of work is being done. We shall see the effects of these things soon," he said.

India’s economic growth accelerated to 7.4% in the second quarter of the current fiscal year from 7% in the previous quarter, riding on a spike in industrial activity and pick-up in investment demand. The government projects economic growth to be above 7.5% in 2015-16. In 2014-15, the economy grew 7.3%.

With EBR, Hero MotoCorp planned to enter Europe and the North American markets, and both companies had planned to sell 65,000 units in these markets by 2017.

While Hero was to use EBR’s distribution network in North America, in Europe, the two parties were to create a joint marketing network.

The companies aimed to sell as many as 20,000 units of EBR motorcycles by 2017 from a meagre 65 units in 2012.

In April, EBR, the US motorcycle maker in which Hero held a 49% stake, shut operations and filed for bankruptcy protection from creditors.

Hero was working on five new platforms with EBR, including the HX250R and electric scooter Leap, electric bike SimplEcity, hydrogen-fuel cell bike iON and diesel hybrid RnT.

“We clearly have had a setback there. The whole process of the receivership has taken a fairly long time. It is still going on for rest of the auctions. That stuff is still coming in. So, once that is here, we will evaluate. We are still displaying the HF250R. Fair amount of work is going on there," Munjal added.

The two-wheeler maker plans to invest in brand-building in Africa as it believes strong brands play a bigger role than quality there.

Hero currently does not have a presence in Nigeria and South Africa.

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Published: 05 Feb 2016, 12:30 AM IST
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