Less than two months into the re-opening of the economy, Hero MotoCorp Chairman Pawan Munjal is extremely confident about demand recovery. The company's May sales fell 80 percent in May, as operations had just resumed after the lockdown. But things have picked up sharply since then.
Speaking exclusively to CNBC-TV18, Munjal said, “We did much better than others in May. We have set ourselves high targets. The engine is revving and we are sprinting. I can tell you that we are retailing more than 18000 units per day”.
Hero MotoCorp dispatched 1.12 lakh units to dealers in May and sold 1.6 lakh units in retail sales.
Industry sources say the company is looking to increase dealer dispatches to 4.5 lakh units in June. The company’s manufacturing units had resumed operations in the first week of May. Munjal said that the setting up of a business continuity team just before the lockdown helped the company get to speed.
“I have had over 32 town halls with all stakeholders. I am keeping everyone’s morale high during these times”, he said.
Munjal said that COVID-19 has positively impacted two-wheeler sales, with people wanting their own personal vehicles rather than using public transport.
“We are seeing a lot of pressure on our entry level vehicles and our Splendour and Passion motorcycles. In fact, the dealers are creating such a big pull right now on our factory, that there is a lot of pressure on both the supply chain and the factory which is a very good thing to happen to us”, he said.
“We are seeing very good demand from semi urban and rural markets”, Munjal added.
Hero MotoCorp continues to actively look for strategic partners.
“We are very keen for an M&A, a strategic partnership which serves our future mobility program”, said Munjal. Sources say the company has in talks with Harley Davidson among other possible partners. However, Munjal dismissed these claims as speculative.
The company has slashed capital expenditure by 40 percent for FY21 due to economic disruptions caused by COVID-19. Officials have said, that an exercise is underway to reduce publicity, marketing, and capacity expansion expenditures. Hero MotoCorp has decided to defer the expansion of the Chitoor plant. Munjal emphasized that there will be no reduction in R&D spends. The company will be launching the Xtreme 160R in the coming weeks and other product launches are also on track, sources said.
Supply chain management
Munjal said that COVID-19 and the Indo-China border tensions has made it imperative for companies to look for alternate supply chains.
“At Hero, when the Coronavirus hit China – end of December, early January, we had already started looking at alternate sourcing of the imports from China. Having said that alternate sourcing doesn’t happen overnight, it takes time. Testing time is very crucial in the automotive industry. In our case there are not too many parts that we import from China, we already have developed some of the components, we have the alternate sourcing and over the next few months we would be self-sufficient without any imports from China if required”, he said.
First Published: IST