Premium motorcycles, electric scooters fuel Hero MotoCorp's Q1 FY27 performance

Hero MotoCorp’s Q1 FY27 profit jumped nearly one-third and core earnings rose by a fourth. This was driven by strong volume growth and higher average selling prices. The biggest two-wheeler manufacturer in India's Q1 FY27 positive performance was backed by strong demand for its premium motorcycles and electric scooters.

Hero MotoCorp entered the Indian electric two-wheeler arena late, as compared to its rivals. The company sells its electric scooters under the Vida sub-brand. However, despite being a late entrant, the Vida electric scooters have started grabbing a lot of eyeballs. While EVs make up only 3% of Hero's total volume, the Vida VX2 series of electric scooters has started fetching a lot of sales numbers. On the other hand, the company's flagship Vida V2 Pro received approval for production-linked incentives (PLI) on July 8. According to Goldman Sachs, this indicates a further ramp-up in volumes for this EV.

Hero MotoCorp's revenues surged 36% year-on-year (YoY) in the last quarter to ₹13,000 crore, aided by a 23% volume growth to 1.68 million units. Premiumisation across the company's product portfolio, driven by a shift in mix towards premium motorcycles and scooters, as well as EVs, contributed a positive mix benefit of 8%. The overall core ICE portfolio of the OEM grew 21% YoY in Q1 FY27, backing the 151% EV growth, while core motorcycle volume grew 17% YoY to 1.48 million units. According to Morgan Stanley, revenue growth for the automaker was supported by volume expansion, with revenue and EBITDA exceeding consensus estimates.

Hero MotoCorp holds pole position

In the 100 cc category, which remains a key driving force of the Indian two-wheeler market, Hero MotoCorp’s market share stood at a formidable 85.8% in the last quarter. The 125 cc segment’s share rose steeply to 17.8% in the April-June quarter of FY27, as compared to 12.8% recorded in the same period a year ago. The EV sub-brand Vida expanded its market share to 10.9%, with revenue now contributing about 5% of the total mix.

Mint quoted the Hero MotoCorp management noting that EV inventory is just 2-3 days, indicating strong pent-up demand. The company also reportedly said that it plans to expand EV capacity to 45,000 units per month by the end of FY27, from current capacity of 30,000 units per month.

The parts, accessories, and merchandise segment of the brand, which was a 13% revenue contributor, grew by 30% YoY in Q1 FY27. The company is investing ₹750 crore to more than double the handling capacity in the segment. Export volume for the brand also jumped 63% YoY, with market share rising to 6.8%.

Better positioned to navigate raw material challenges

Reuters has cited analysts saying that the results suggest the auto OEM is in a better position to navigate raw material inflation than previously feared. The company's focus is shifting to rural demand, market-share gains in premium motorcycles and scooters, and its EV strategy, they said. Rising commodity costs due to the Middle East conflict have affected automakers' margins in the last quarter, forcing them to hike vehicle prices.

The war in West Asia triggered inflationary spikes across oil and gas, freight, foreign exchange, and core raw materials, including steel, aluminium, and precious metals. To cope, Hero has implemented a cumulative blended price hike of about 4.5% across its ICE portfolio since late February, and early double-digit increases for its EV variants.

Mint has reported that accelerated cost savings under its internal leap programme and operating leverage offered the company some cushion, curtailing the June-quarter EBITDA margin drop to 114 bps YoY and 122 bps sequentially to 13.3%. Core ICE portfolio EBITDA margin rose 90 bps sequentially to 15.9%.

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