Milan: Hero MotoCorp, the world’s largest maker of two-wheelers by volume, is reviewing its overseas sales strategy after its almost one-decade old globalization plan did not take off and the domestic market still accounting for 97% of its sales.
The company has set a target of selling one million units overseas annually in the next three to four years, Rajat Bhargava, head of global business for Hero MotoCorp, told ET. With a projection of increasing total annual sales to 10 million units during the same period, the company expects overseas sales to contribute 10% to its revenue from 3% at present, he said.
In FY19, Hero MotorCorp sold about 210,000 units abroad out of the 7.8 million units that it produced.
Notably, selling one million units in foreign markets annually was a five-year target that the company had set for itself earlier too, in 2011, after splitting from its erstwhile partner Honda.
Hero MotoCorp currently has operations in close to 40 countries and it will enter no more than three new markets in the next few years, Bhargava said. “The priority is to make sure wherever we are present, we grow in those markets.”
Subsequently, the company is set to miss another target it had set itself in 2011 – of being present in 50 markets by 2020.
Emerging markets like Bangladesh, Columbia, Nepal, Sri Lanka and Nigeria are some of the big export destinations for Hero, where mass-market products like Splendor and Passion have a high relevance. The company has two overseas manufacturing plants, one each in Bangladesh and Columbia, with Bangladesh accounting for almost half of its overseas business.
“The plan is a combination of how we grow in the existing markets where we are already big. And in those countries where we have just entered, or are about to enter, to get from 0% to 5%,” Bhargava said. Winning consumer confidence in any country as a new entrant is a big challenge, he said, and it takes time to consolidate market share even for one of the world’s largest manufacturers.
A larger global footprint will also help the company hedge itself from a sales slowdown in India – like the ongoing one where sales have declined by over 16% during the April to September period over last year. Hero MotoCorp’s peers Bajaj Auto and TVS Motor derive 45% and 20% of their sales, respectively, from overseas markets.
However, Bajaj and TVS have a head-start over Hero, with the former two having been exporting two-wheelers for almost two decades now.
(The correspondent is in Milan at the invitation of Honda Motorcycles & Scooters India Ltd.)