Chairman's Message Pawan Manjul
Chairman's Message Pawan Manjul
Chairman's Message Pawan Manjul
tectonic shifts in the industrial geo-political and socio-economic landscape. We are currently
operating in one such epoch that will define legacy that we will leave behind for our future
generations.
The future is filled with promise and as always your Company is at the forefront of this
evolution.
Brand Hero today has a global presence spread across a large and diverse geographical expanse
with manufacturing facilities in India Colombia and Bangladesh. It is therefore important for us
to recognize the various events around the world that could impact us. The global economy has
started to stare down at a period of a synchronized slowdown. This is happening due to several
factors such as the US-China trade war the lingering uncertainty over Brexit consistently slow
economic growth in the European Union a sputtering Chinese growth engine and the rise of
protectionist governments in many key economies.
Adverse conditions however generally lead to a brighter and advanced future for society. We
therefore expect the global economy to come out stronger from this phase. On that positive
note let me now take you through performance of Hero MotoCorp in one of the toughest fiscal
years for the two-wheeler industry in the recent past.
This is the philosophy that defines Brand Hero as the Company continuously strived to
innovate and excel in everything that it did across all its functions in FY'19. It was also another
year of several `firsts' for us. We achieved higher sales milestones launched multiple new
products expanded our manufacturing and R&D facilities and set the benchmark in being a
socially responsible corporate. All our seven state-of-the-art manufacturing facilities including
five in India and one each in Colombia and Bangladesh - continued to set the benchmark in
manufacturing excellence enabling the Company to maintain its market leadership.
A Premium Journey
During the year we forayed into two new product segments - the premium motorcycle space
with our new Xtreme 200R motorcycle; and the 125cc scooter category with the Destini 125.
Destini is also the first scooter in India to have our revolutionary i3S (Idle Start-Stop-System)
technology.
Proving to be a blockbuster our new 125cc scooter Destini has become the fastest scooter brand
in India to surpass the 100000 unit sales mark. These new products will soon be launched
across key markets in Asia and South America with the aim of growing our presence in these
product categories.
Cruising past Sales Milestones
In the Indian market the second half of the fiscal was hampered by a host of impeding factors
such as increased insurance premium costs lack of liquidity in the markets poor consumer
sentiment and increasing fuel prices. Yet your Company managed to ride through the storm and
continued to remain the numero-uno player in the country by a fair margin!
We registered a record sales of 7.8 million units during the fiscal a testimony to our grit
resilience and product excellence. In this process we also crossed the landmark customer base
of 90 million units sold. We also became the first two-wheeler company to surpass 750000
units in monthly sales in September 2018 besides achieving 700000-plus monthly sales on four
separate occasions during the year. Our evergreen brand Splendor also reclaimed its coveted
position to become the largest two-wheeler brand made in India.
Most of our global markets also continued to operate in a complex and dynamic macro-
economic environment leading to a weaker global expansion especially in the second half of
2018. Despite these challenges we managed to improve our sales performance in many markets
including Latin America where our dispatches grew by 38% and the Asian region where we
grew by 12% in terms of retail sales. In Bangladesh we crossed the landmark 100000 unit retail
sales.
Our new advanced and appealing product range is a testimony to the robust Research and
Development (R&D) capabilities that we now possess at our global R&D hub - the Hero Centre
of Innovation and Technology (CIT) - in the northern Indian city of Jaipur Rajasthan. In FY'19
we also gave shape to our vision of creating a global R&D ecosystem by setting up our first
international technology centre the Hero Tech Center Germany GmbH (HTCG). This new
centre will operate in tandem with the CIT to develop new vehicle concepts modern designs
and create mobility solutions of the future.
The HTCG has been envisaged as a source of latest technologies with a focus on the global
customer base. It will also enable us to tap into the huge pool of resources readily available
across Europe and merge them with our ongoing operations at the CIT. In addition it will be the
epicentre of our motorsport team venture - the Hero MotoSports Team Rally - which has
become the flag bearer of Indian motorsports on the global platform. Engineers designers and
product experts from over 10 countries are now engaged at the CIT and HTCG to develop
products that suit the sensibilities of our diverse global customer base and are future-ready.
Creating a Sustainable future
As a global automotive player and industry leader in India we are well congizant of our role
and responsibility in ensuring Sustainable Development of the industry India and the world.
Our manufacturing facilities spread across two continents maintain the highest ecological
standards while meeting business objectives helping create a sustainable tomorrow. In tandem
we continue to work with our Supply Chain Partners to strengthen the overall Sustainability
Footprint. Our comprehensive Sustainability Report for FY'19 encapsulates the Company's
framework approach and efforts on sustainability.
Our upcoming manufacturing facility- the Garden Factory at Chittoor in the southern Indian
state of Andhra Pradesh - reaffirms our commitment to green and sustainable manufacturing.
Once completed it will take our total installed capacity to around 11 million units and generate
around 15000 jobs in direct and indirect opportunities with the creation of a sustainable
ecosystem of vendors and suppliers in the region.
In safe hands
As a responsible organization we have always contributed to the betterment of the society and
our Corporate Social Responsibility (CSR) programmes are designed to have a positive impact
on as many lives as possible. Our key CSR initiatives focus on the well-being of children and
women from marginalized and less privileged backgrounds and also on the conservation and
protection of the environment. Our spends on CSR have been far more than the mandatory 2%
of our net profits since 2015 and the scale and the impact of all our programmes has also been
growing year-on-year.
Our education focused projects have enabled over 300000 children from rural areas in India to
compete with their privileged counterparts in urban India. Likewise close to 20000 young girls
and women have been trained in various trades at our skill centres and are now gainfully
employed. A large part of our CSR allocation also goes towards meeting our environmental
aspirations through the `Happy Earth' programme as a part of which your Company planted
more than 2000 trees per day totaling to 760000 trees during the year.
Sports is one of the essential elements of our CSR platform. We encourage sports at grassroots
level and have made considerable investments to build necessary sports infrastructure in rural
areas. Supporting professional Paralympic athletes to prepare for and participate in
international events has also been a priority for the Company.
Road safety continues to be another top priority of Hero MotoCorp. We continue to invest
significantly in road safety awareness and safe riding trainings through our `Ride Safe India'
programme which has seen participation from over 500000 people so far.
The current global technology landscape is ever-evolving and we continue to keep ourselves
aligned with the changing world trends. During FY'19 enterprise systems in production
technology got further streamlined across the globe. In an endeavour to stay ahead of the curve
we also adopted technologies such as Robotic Process Automation Artificial Intelligence (AI)
IOT Block Chain and Machine Learning to name a few. In our key international markets like in
Colombia we used new age technology to develop a system where we are able to approve loans
in 10 minutes - a first-of-its-kind initiative in that market. Similarly in Argentina we have
developed a single-webpage user interface where the customer gets all the relevant information
regarding - sale insurance finance and accessories on a single window. Such innovative new
initiatives enable us to differentiate ourselves from competition. At the same time providing a
value-added and convenient purchase experience to the customer.
People Strong
In keeping with our commitment we have significantly increased our focus on diversity and
inclusiveness. As Hero increasingly continues to become a more global brand I can assure you
that we remain committed to the tenets of diversity equal opportunity and inclusion.
Global Headwinds
The global footprint of your Company is now spread across 37 countries in Asia Africa South
and Central America and the Middle East. Many of the international markets that we entered
into during the past few years however are grappling with their own economic issues.
FY'19 turned out to be an engaging and challenging year and brought with it a new wave of
opportunities and successes even as it tested us with a unique set of problems.
While the world braced for `slowbalization' your Company did the opposite and continued its
globalization journey by investing in new markets introducing new products across segments
and expanding its distribution networks.
Our business in most of our global markets including in Colombia and Bangladesh where we
have manufacturing operations - is steadily gaining traction. We will continue to scale up our
operations in sync with the market sentiment. We will also continue building the brand through
various initiatives such as participating in marquee global and regional Auto Shows and sports
partnerships.
Regulatory environment
The two-wheeler industry in India continued to grapple with the effects of regulatory changes
during FY'19. The Insurance Regulatory and Development Authority of India (IRDA) made it
mandatory for all new two-wheelers to have five-year third-party insurance cover.
From April 2019 it also became mandatory for all new two-wheelers with an engine
displacement of over 125cc to be equipped with anti-lock braking systems (ABS) while all
lower displacement two-wheelers were required to have a combi-braking system (CBS).
The cost implications of the five-year insurance adversely affected the common man who uses
a two-wheeler to commute and in the process slowed down the entire two-wheeler industry in
India. We believe that the government needs to urgently mitigate this by providing cost relief to
customers.
One significant step in this direction can be if the Government removes two-wheelers from the
highest GST slab of 28% meant for luxury goods to the 18% slab. This will help revive the
industry which in turn will help in bringing the economy back on track.
Sporting Moves
Looking beyond business Hero MotoCorp firmly believes in the transformational power of
sports on society and remains committed to supporting and nurturing diverse disciplines of
sports such as Football Hockey Motorsports Cricket and Golf around the world.
Having begun our association with Sporting icon Tiger Woods in 2014 we further strengthened
our journey with him in FY'19 by retaining him as our `Global Corporate Partner'. Tiger's
persona transcends geographical cultural and generational boundaries. He has scripted the most
extraordinary return to the highest echelons of the game through sheer persistence true grit and
determination to win. As Brand Hero keeps expanding its global footprint across continents
Tiger will continue to play a valuable role in taking our core messages to the world thereby
creating higher awareness for our brand across geographies.
Our motorsports team Hero MotoSports Team Rally did us proud once again this year. The
team achieved its first podium finish of 2019 at the Merzouga Rally in Morocco close on the
heels of an impressive run at Dakar Rally 2019.
We have since strengthened the team's profile further by signing on the Portuguese champion
Paulo Goncalves as our fourth rider in addition to India's CS Santosh Joaquim Rodrigues from
Portugal and Oriol Mena from Spain Especially in Latin America we have been using Football
to create and sustain awareness for the brand. A very successful TV campaign featuring Cholo
Diego Simeone was run during the World Cup that created a massive awareness for the brand.
Looking ahead
The entire world is adopting the global mobility trends of electrification (EVs) shared mobility
and connected two-wheelers. The Company is working on several EV projects and is fully
geared up for this challenge.
Hero MotoCorp has also made a sizeable strategic investment in the electric two-wheeler
manufacturer Ather Energy based out of Bengaluru India. Ather has already launched a range
of path-breaking and innovative electric scooters.
We highly appreciate and whole-heartedly support the Indian government's vision of a more
sustainable and environment-friendly future. We therefore propose a more cautious clear and
realistic roadmap towards the adoption of EVs. The scale and timing of the adoption need
prudent deliberations and we will gladly support all stakeholders in this process.
While the world economy is still facing some headwinds and uncertainty continues to loom
over global geopolitical climate we aspire to firmly stride on our growth path.
Global growth expectation has softened to 3.3% for 2019 with short term socio-political and
trade uncertainties across countries. In Latin America growth is projected to recover to 1.4% in
2019 and 2.4% in 2020. While Brazil Colombia and Mexico are expected to grow Argentina
and Venezuela are likely to decline in 2019. Growth in the Middle East & North Africa
(MENA) region is expected to weaken to 1.5% in 2019 before recovering to about 3.2% in
2020.
India's economic growth rate has reportedly slowed to a five-year low of 5.8% during the
January-March 2019 quarter while joblessness in the country rose to a record 6.1% of the total
labour force during 2017-18 - the highest in the past 45 years.
India's Automotive Mission Plan 2016-26 has envisioned an increase in the automotive sector's
share of the country's GDP from the current level of 7% to 12% by the year 2026. With the
ongoing urbanization rising income levels and supportive regulations we are confident that the
industry will meet this target and your Company intends to continue playing a critical role in
this upward shift.
At Hero every member of the family has a key role to play as we progress towards becoming a
global entity and achieving greater success. I can assure you all that we will continue to create
value for each one of you while continuing with our efforts to create a greener safer and
equitable society.
I thank all our stakeholders including all the channel partners vendors and suppliers tech
partners investors all associates government officials and above all our customers for their
unwavering support.
Pawan Munjal