'Competitors may take Hero head on'

The upcoming fiscal year (FY17) could be a difficult year for homegrown two-wheeler major Hero MotoCorp with 68 per cent of the company’s volumes likely to face tough competition, according to a report by CLSA.

“Hero will come under competitive attack on multiple fronts in FY17. Bajaj and TVS will make a fresh onslaught on the commuter segment with new 100-125 cc bikes in Q4FY16. Honda is likely to turn more aggressive in scooters, once its new scooter plant gets commissioned in Q4. In all, 68 per cent of Hero’s volumes will come under attack in FY17, posing a risk to its market share,” Asia’s leading and longest-running independent brokerage and investment group, CLSA, said in a note.

Two-wheeler demand is still subdued and there could be pressure on the margins as well, if demand does not pick up in FY17, CLSA said.

According to the note, even if one of the new launches becomes successful, it could dent Hero’s share in the commuter segment, but past attempts by other auto majors have failed.

“Bajaj is due to launch a new 100-125 cc bike in the commuter segment in Q4FY16 under a new brand, targeting Hero’s best-selling Splendor and Passion. TVS is all set to launch a new 100 cc bike, Victor, which we believe will target Passion. Bajaj and TVS (as well as Honda) have, in the past, tried to make a dent on the Splendor and Passion, but never succeeded,” CLSA says.

But if even one of these bikes clicks with customers this time, Hero could see a big impact as Splendor and Passion together account for 57 per cent of Hero’s volumes, CLSA adds.