Hero bets on premium 125 cc segment for scooters despite slowdown in market

The company is following a similar strategy of premiumisation for motorcycles where its strength lies primarily in the entry level segment of 100-110 cc

Arindam Majumder  |  New Delhi 

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A Hero scooter model

Despite a slowdown in the market due to poor demand, is betting on the premium segment to take a leadership position in the scooter segment.

launched on Monday two new to cater to both, domestic as well as international markets. It introduced Maestro Edge 125 with fuel injection technology priced at Rs 62,700. The company claimed Maestro is India's first scooter with fuel injection technology.

Scooter sales have dropped for the first time in 13 years, as customers from urban and semi-urban are going slow on purchase due to poor sentiments. Scooters, which account for nearly one-third of total two-wheelers sold in India, reported a 0.3 per cent drop in sales to 6.7 million units from 6.72 million units in the previous year.

“People have asked me that there is a slowdown going on. Why are you launching new products? But my theory is through these product launches we will be able to stimulate the market and encourage buyers. The leader always bats on the front foot,” said Sanjay Bhan, head of sales and after sales at Hero, in an interview.

Last year, entered the scooter segment launching in order to ring fence itself from the strong challenge posed by Honda’s Activa. Bhan said that the premium segment of has seen a phenomenal growth of around 50 per cent which is encouraging the company to invest in it.

“In urban markets, have already reached penetration levels of around 50 per cent. We will continue to build the 110-cc scooter segment as it constitutes 75 per cent of scooter sales. But it is the scooter segment which we will focus on,” said Hero's Chief Financial Officer Niranjan Gupta.

Explaining the reason behind the premiumisation trend in scooters, Gupta said that customers are looking to upgrade to slightly more powerful and feature-loaded propositions. “In urban areas, which are the primary market for scooters, the college going students who are a big chunk of buyers of scooters. I believe scooters are not offering them the excitement anymore and they searching for that in the 125 cc segment. Quite a few models, not just from Hero but also from the competition, have energised that segment,” Gupta said.

The company is following a similar strategy of premiumisation for motorcycles where its strength lies primarily in the entry level segment of 100- It recently expanded its offering in the premium 200cc segment by launching three new motorcycles — Xtreme 200S, XPulse 200, and Xpulse 200T.

“We are working on a complete portfolio plan where there would be offerings in all segment. The 100-are here to stay due to its affordability,” Bhan said.

The company has earmarked a capex of Rs 1,500 crore this financial year - almost double of Rs 750 crore in FY19 which will be primarily used for new product development and BS VI upgradation.

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First Published: Mon, May 13 2019. 22:41 IST