‘Scooterization’ & ‘premiumization of motorcycles’ cuts through the market share of mass motorcycle producer Hero MotoCorp
Hero MotoCorp currently commands more than 70% market share in the commuter (mass market) motorcycle segment, however, it’s presence has been bitten off at both ends by simultaneous ‘scooterisation’ and popularisation of premium segment motorcycles. Honda’s trump card — the Activa, for the first-time buyer — played out and earned it leadership position and 55% market share in scooters. As scooterisation rode the crest, the share of mass market motorcycles narrowed the volume gap between scooters and entry-level motorcycles to a mere 4%. Besides in domestic premium motorcycle segment, the world’s largest two-wheeler maker is chaffing at the erosion in its share from 15-16% a decade ago to low single digits today.
Why is it important?
Hero Motocorp is currently underrepresented in the scooter and premium motorcycle segments. With these segments gaining prominence, Hero needs to up its ante in order to gain a significant market share. To do so, Hero has introduced a slew of measures including a range of premium launches lined up for this year. How these measures pan out for Hero MotoCorp is to be seen in the coming future.
How will the stock be impacted
With focus shifting to scooters & premium motorcycles, competition has intensified in these segments where Hero Motocorp currently has a low market share. It remains to be seen how these new measures introduced pan out. Any gain or loss in market share could significantly impact performance of Hero MotoCorp (CMP: Rs. 3480, MCap: Rs. 69,500 Crores, FY2019 P/E: 17.3x).