Hero Moto Corp Analysis

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• Falling ownership costs

• Rising Two-wheeler penetration amid limited availability of public transport and last mile connectivity

• Severe competitive intensity would restrict pricing power for OEMs(Original Equipment Manufacturer) in an environment of commodity price fall resulting in benefit to customers

• FDI inflows in the automotive sector aggregated USD8.1 billion (4.2 per cent of the total FDI) over April 2000 – February 2013 and is projected to grow at 7 percent having 80% contribution towards Two Wheelers

• The Indian automotive sector has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product, as per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government of which 70% belongs to Two Wheelers in terms of volume.

4. SWOT Analysis for Two-Wheelers

Strengths

• Two wheeler sales productions have gone annually from 8.5 Million units to 15.9 million units in the last seven years providing scale for expansion.

• A growing working population, increasing disposable rural agriculture sector income and an expanding middle-class is attracted towards the low credit, less expensive and convenient mode of travel

• GDP per capita has grown from USD 1,432.25 in 2010 to USD 1,500.76 in 2012, and is expected to reach USD 1,869.34 by 2018. Thus disposable income is more resulting in more spending

• Automatic approval for foreign equity investment up to 100% with no minimum investment criteria for two wheeler sector

• The emergence of large automotive clusters in the country: Delhi-Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik-Aurangabad in the west, Chennai-Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east along with SEZs provides impetus to more two wheeler vehicles sales

• A weighted tax deduction of 200% is given under section 35 (2AA & 2AB) of the Income Tax Act for the automobile industry in general.

Weakness

• Declining sales of motorcycles (-3.4%) due to less innovation

• Bulk travel is not possible in two wheelers, also not convenient for large families

• The luxury and experience of commercial four wheeler vehicles

• Safety, security and emission is a problem

Opportunities

• India to become 3rd Largest automotive market by volume in the world by 2016

• Significant opportunities exist in the rural market with the better monsoon prediction in 2016

• Upgradation of 50000 kms and built up of 10,000 kms of roads in budget 2016

• 1% infrastructure tax on cars in the 2016 budget tilting focus to two wheelers

• Increase in the middle class income level due to 7th pay commission and OROP (one rank one pension)

• Decreasing fuel prices with an estimate to reach 20$ per barrel resulting in more consumption

• Commodities prices falling resulting in low metal price thus less input cost of automobile manufacturing

• Favourable government policies like lower excise duties, automotive mission plans, the constitution of NATRiP (National Automotive Testing and R&D Infrastructure Project) , National Mission for Electric Mobility 2020, FAME - Faster Adaption and Manufacturing of Hybrid land Electric Vehicle

Threats

• The biggest threat is of the cyclical nature of industry. Sale happens depending on the monsoons and economic situation.

• There is a growing threat of electrical vehicles as the new blue ocean strategy. The recent launch of E-rickshaws and more focus on solar powered vehicles may affect the present technology of automobiles.

• The slowdown in rural demand, particularly for the mass-market commuter bikes, inconsistent rainfall and reduced farm output is a threat

• The exports have taken a slowdown which negatively impact margins resulting in more competition. The expiry of excise duty & income tax incentive in Uttarakhand has impacted negatively to Hero, Bajaj & TVS.

5. Strategy for Hero to mitigate risk of aggregators

With the increased inflow of FDI into infrastructure & manufacturing, road transport is going to get a boost in the coming years. The various strategies which can be used by Hero are-

Motorbike Insurance Motorbike Registration

Motorbike Reselling Travel Planning Assistance

GOLD MEMBERSHIP– FOR BIKES LESS THAN 200 CC ( RS 849 PER YEAR FOR A USAGE OF 3 TIMES) PLATINUM MEMBERSHIP- FOR BIKES MORE THAN 200CC ( RS 1149 PER YEAR FOR A USAGE OF 3 TIMES)

Breakdown Services Breakdown Services

 Free Emergency Breakdown Services  Flat Tyre Service

 On-Site Support- 24 X 7  Emergency Fuel Delivery

 Panic Button Service(via APP)  Vehicle Key Service

 Trace mate-Mechanic Location(via APP)  Panic Button Service(via APP)

On-Site Assistance  Trace mate-Mechanic Location(via APP)

 Tyre Punctured (In Case of Double Tyre Puncture) and Tyre Replacement with Stepney  Tyre Punctured (In Case of Double