Why Hero MotoCorp’s electric scooter failed to woo investors

The VIDA V1’s overall features are impressive, but its position at the upper end of the two-wheeler electric vehicle (2W EV) band is seen as a dampener. There are two variants available at ex-showroom price 1.45 lakh and 1.59 lakh respectively. Thus, it is natural that investors are concerned that higher prices may limit product volume and its ability to scale. “Currently, 2W EVs account for about 80% of the industry’s volume 60-120k price bucket, where customers find the price-price equation favorable. This will become even more relevant when governments (Centre and states) reduce the quantum of subsidies,” said an October 10 report by IIFL Securities Ltd. It also pointed out that Hero in the internal combustion engine (ICE) business Its strength is the mass-market category, but it has had limited success in the premium segment.

The VIDA V1 is being launched in a phased manner, with the product previously available for retail sale only in Delhi, Bengaluru and Jaipur. Delivery will start from the second week of December. Varun Baxi, an analyst at Nirmal Bang Institutional Equities said, “With Hero’s EV, the company has tried to allay market concerns over the lack of R&D capabilities of Hero following its de-merger with Honda. ” However, it remains to be seen how booking fares for this model considering its hefty price tag for a scooter. Also, speed of execution and expansion are key factors that investors should pay attention to.

“The proof of pudding will lie in the execution, given that Hero Moto’s brand equity in ICE products is eroding. We expect Hero Moto to accelerate its new product cycle and get it a first hit and miss as well,” as per Nuvama Research.

Meanwhile, Hero Moto shares have underperformed on account of loss of market share in entry-level motorcycles in its crucial segment. Shares are up 4.40% so far in CY22, while Nifty Auto index is up 16%. Bloomberg data shows Hero’s stock is at 13.61 times the FY24 price-to-earnings multiple, which TVS Motor Co. Ltd and Bajaj Auto Ltd. “For a turnaround in the performance of the stock, the company needs to see a sustained and meaningful recovery in the entry-level segment. This is a major trigger. We do not expect to see a re-rating in valuations based on this EV launch.”