Hero MotoCorp Looks to Expand Market Share with Harley Davidson Collaboration and Competitive Pricing
Indian two-wheeler manufacturer, Hero MotoCorp, aims to strengthen its presence in the premium segment by introducing the Harley-Davidson X440, a new mid-size bike developed in collaboration with the renowned American brand. With a starting price of Rs 2.29 lakh, the Harley-Davidson X440 is expected to attract consumers in the 350cc segment, offering a competitive price point just 15 percent higher than the popular Royal Enfield Classic and Meteor 350cc models.
Analysts predict that Hero MotoCorp’s extensive dealer network and potential for increased production volume will contribute significantly to the success of the bike. They estimate a monthly volume of 5,000 to 10,000 units once deliveries commence, although it may take a few months to ramp up production. However, the ultimate success of the Harley-Davidson X440 will depend on its product performance and quality, as highlighted in reviews and feedback from customers.
Jefferies India noted in a recent report that they expect Hero MotoCorp to sell around 10,000 units per month from jointly developed products with Harley, in comparison to Royal Enfield’s total domestic volumes of 61,000 units per month (FY23) and 77,000 units per month (FY25). Although the initial impact on Hero MotoCorp’s earnings may be modest (estimated at 1-2 percent), the collaboration with Harley-Davidson is viewed as a stepping stone towards success in the premium segment.
Nomura Research also underscored the potential for multiple players in the above-250cc market segment, stating that consumers prefer having choices. Currently, Royal Enfield dominates this segment with a 90 percent market share. The high gross margins of Royal Enfield, at 43 percent, make it an attractive space for new players like Hero MotoCorp. Nomura maintained a neutral rating on Hero MotoCorp’s stock but raised its target price to Rs 2,899 per share from Rs 2,870 per share.
Jefferies India expressed confidence in the recovery of the Indian two-wheeler industry after experiencing an unusual downturn in the business cycle. They anticipate significant volume growth for the industry, with a compound annual growth rate (CAGR) of 18 percent from FY23 to FY25. Similarly, Jefferies expects Hero MotoCorp’s volumes to expand at a CAGR of 14 percent during the same period. The brokerage house also forecasts a CAGR of 26 percent for Hero’s earnings per share (EPS) over the FY23-25 timeframe.
Although Hero MotoCorp’s stock has performed strongly in recent months, rising 29 percent and outperforming the Nifty-50 by 17 percent, Jefferies views it as an attractive investment. With a price-to-earnings ratio (PE) of 15x/13x FY24/FY25, compared to the long-term average of 16x, and a 4-5 percent dividend yield, the stock offers potential for future gains. Jefferies believes that sustainable success in premium motorcycles, electric vehicles (EVs), or exports could improve Hero MotoCorp’s long-term outlook.
In conclusion, Hero MotoCorp’s collaboration with Harley-Davidson and the launch of the Harley-Davidson X440 is expected to boost the company’s market share in the premium segment. With competitive pricing and the advantage of an extensive dealer network, Hero MotoCorp aims to attract consumers currently loyal to Royal Enfield. Analysts see significant growth potential for Hero MotoCorp and an opportunity for it to establish a strong foothold in the above-250cc market segment.
