Hero MotoCorp losing rural 2-wheeler market share to other companies

Hero MotoCorp, India’s largest two-wheeler maker, has seen a decline in its market share in rural areas since 2018, losing ground to major competitors such as TVS Motor Company, Bajaj Auto, and Honda Motorcycle & Scooter India (HMSI), according to data from JATO Dynamics reviewed by Business Standard.

Hero’s share of rural two-wheeler sales in India has dropped from 40.4 per cent in 2018 to 33.3 per cent in 2023.

In contrast, Bajaj’s share increased from 12.7 per cent in 2018 to 13.9 per cent, HMSI’s from 21.8 per cent to 22.2 per cent, and TVS’ from 15.5 per cent to 17.8 per cent.

Suzuki Motorcycle India has also seen its share rise from 1.7 per cent to 2.5 per cent.

Industry sources attribute the rise in rural market share for Bajaj, Honda, and TVS to their robust marketing efforts, growing demand for more premium vehicles (in which these companies have strong offerings), and the expansion of dealership networks in rural areas.

According to Jato, any area with a population density of not more than 400 people per square kilometre is considered a rural area.

Hero has been the leading player in rural areas, primarily due to its extensive range of products in the commuter motorcycle segment (below 125cc).

Despite intensifying competition, the rural two-wheeler market has yet to fully rebound to its 2018 levels.

JATO Dynamics reports that 3.54 million units and 3.157 million units of two-wheelers were sold in rural India in 2018 and 2023, respectively.

JATO defines rural areas as those with a population density of up to 400 people per square kilometre.

Since 2018, the rural market has steadily grown in significance for HMSI.

The Japanese company’s sales in rural India accounted for 16.1 per cent of its total sales in 2018, a figure that has climbed to 19.7 per cent by 2023.

Yogesh Mathur, director, sales and marketing at HMSI, told Business Standard that the revitalisation of rural markets, led by various government schemes, easy financing options, and a rise in delivery services, has enabled the two-wheeler industry to experience substantial growth and momentum across regions in 2023.

“Our strategic foray into the 100cc category with the Shine 100, combined with competitive pricing, has enabled us to reach out to a broader audience.

"Further, the rise in the expansion of our network (dealerships) across rural markets by over 35 per cent in the past two-three years has supported in gaining more traction and offering convenience to our customers,” he said.

A noticeable shift in customer preference from the 100cc to the 125cc segment, due to a rise in purchasing power, has also benefited HMSI, he added.

“As the momentum continues to grow, we are expecting the overall two-wheeler industry to grow by higher single digits towards the end of 2025, a trend that will be witnessed in the rural market as well,” he added.

Hero, TVS, Bajaj, and Suzuki Motorcycle did not respond to Business Standard’s queries.

In the after-results call with analysts on February 10, Hero MotoCorp chief executive officer Niranjan Gupta expressed optimism about growth in rural areas.

He said that during the last festival season, the company had a higher number of enquiries coming from rural areas compared to urban areas.

“Even if you look at the latest data... let’s say the second/third/fourth quarters of 2022-23, it would be around 40 per cent enquiries coming from rural and 60 per cent from urban.

"Now, that seems to be going up to 50-55 per cent of inquiries coming from rural areas.

"Now, therefore, as the enquiries are starting to pick up, that will manifest in the consumption moving forward,” he added.

Hero has also been stepping up its premium play with the launch of the Karizma XMR, Harley-Davidson X440, and the Mavrick 440.

Hero’s consolidated net profit increased by 51.3 per cent year-on-year to Rs 1,091.12 crore in the third quarter of 2023-24 due to high demand for premium products, robust sales during the festival season, a decrease in commodity costs, and price hikes.

TVS has been the biggest gainer in the rural market, with its share almost touching 18 per cent in 2023.

Ravi Bhatia, president of JATO Dynamics India, said that TVS’ success in rural areas could be due to its focus on growth markets, strategic product launches, investment in technology, and strong brand building.