Hero MotoCorp Bullish On Demand Revival As It Targets Festive Season Sale

India’s largest two-wheeler maker expects demand to revive and is gearing up for the upcoming festival season to boost sales at a time when its peers are grappling with broken supply chains.

Hero MotoCorp Ltd. is ramping up its supply chain to build inventory at dealerships and hopes that demand in the entry-level and premium motorcycles segments is here to stay.

“We’re almost back to 80-90% of the pre-Covid levels as far as demand is concerned,” Niranjan Gupta, chief financial officer of Hero MotoCorp, said in a post-earnings call on Friday.

Gupta agreed that while demand was outstripping supply soon after the lockdown was relaxed, the company’s now optimistic that supply will outstrip demand soon.

“Be it a labour issue or a logistics issue, whether there is a liquidity issue you name it, we have been able to ramp up our supply very fast and are ramping up faster than before,” he said, adding that the firm’s improving production every successive week.

The festive period is crucial for automakers as it accounts for nearly a third of their annual sales. A lot is hinging on the pick-up during the season as the drop in sales due to the lockdown came on top of the prolonged slowdown the industry had been grappling with.

“We’re gearing up for a good festive season, and we believe that auto sector and within auto, Hero will continue to lead the charge for economic recovery,” Gupta said.

That comes as the Pawan Munjal-led company’s profit fell by 95% year-on-year to Rs 61 crore in the quarter ended June. Revenue fell to Rs 2,971 crore in the same period.

Hero MotoCorp, which is witnessing a sharp recovery in the rural and semi-urban market following improved crop production, a normal monsoon and fiscal incentives from the government, is hoping for faster demand revival in the urban market as well.

To be sure, the rural market has been strong for Hero MotoCorp. A further improvement in sentiment in the market has aided its growth.

Naveen Chauhan, head of sales and after-sales at Hero MotoCorp, said pent-up sales on the rural side are already over. For the urban market, he said due to higher unemployment rate, demand should return during the festive season.

However, the company warned that intermittent and local micro lockdowns would disrupt demand momentum. “It will disrupt the demand and the supply cycle,” Gupta said.