With former partner and now rival Honda Motorcycle and Scooter India close on its heels, the country’s largest two-wheeler maker Hero MotoCorp has lined up a capital expenditure of Rs 2,500 crore to be spent over this and the next financial years.

The investment would be made towards development and subsequent launch of a series of products for both motorcycle and scooter categories, expansion of Gujarat facility, as well as setting up a new plant in Andhra Pradesh that will get commissioned in the later part of the next financial year.

Niranjan Gupta, CFO, Hero MotoCorp, said, 「The initial capacity of the Andhra plant will be 500,000-750,000 units per annum which will eventually be hiked to 1 million units. The capex guidance for the next two years will be Rs 2,500 crore."

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Though the Delhi-based company clocked a volume growth of 25 per cent to 2 million units during the quarter as against 1.6 million units clocked n the same quarter in 2016-17, rival Honda has closed in on it.

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Honda has claimed numero uno position in 17 markets including high income states such as Maharashtra, Gujarat, Tamil Nadu, Kerala and Punjab. Hero still leads in agrarian-based economies such as Uttar Pradesh, Rajasthan and West Bengal.

Last financial year, the company closed with a share of 37 per cent in the total two-wheeler space. 「We will be entering new segments with new products by which we will consolidate our position in FY19」, said Ashok Bhasin, head of sales, Hero MotoCorp.

The company has already given guidance to launch more products in the premium motorcycle space which is presently dominated by Pune-based Bajaj Auto. These launches will come in this year and flow into next year. In addition, there will be launches in the scooter space — a segment which beat the growth of total two-wheeler market repeatedly over the past few years.

Honda is presently the largest manufacturer of scooters, controlling more than half of the domestic market. TVS Motors follows the leader while Hero is a distant third in the ranking.

Also read: Hero MotoCorp Q4 net profit rises 35% on year to Rs 967 crore

「We expect the industry to grow in double digits and Hero’s growth will be in line with the industry. We further expect the momentum to continue into FY19," added Bhasin.

Hero is banking on its bread-and-butter 100cc bikes such as Splendor and HF Dawn to push sales in the hinterland where budget bikes have regained traction. About 75 per cent of the buying class are first-time buyers in the motorcycle space even as typically 40 per cent of its sales are financed.

Meanwhile, the company said it had to take price increases on certain models in a span of four months to offset raw material pricing pressure.

「We continue to take judicious pricing action with our objective to boost top-line and bottom-line and we will continue to navigate that space," added Gupta.

The company today posted a 35 per cent rise in net profit for the quarter at Rs 967 crore, boosted by a revival in demand from rural pockets from where nearly half of Hero’s demand arises.

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