The coming together of two players from different backgrounds is an indication of the changing dynamics in the electric vehicle space.
02 Feb 2022 | 5630 Views | By Mayank Dhingra, Nilesh Wadhwa
When Mahindra & Mahindra and Hero Electric recently announced their intent to collaborate in the electric vehicle arena, it clearly sent out a message that two heads are better than one. This is especially true for a business like electric where pooling in competencies and investments matter a great deal.
“Considering that the EV space ...
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When Mahindra & Mahindra and Hero Electric recently announced their intent to collaborate in the electric vehicle arena, it clearly sent out a message that two heads are better than one. This is especially true for a business like electric where pooling in competencies and investments matter a great deal.
“Considering that the EV space is still in a nascent stage in India, collaborations will be the way forward,” says Rajesh Jejurikar, Executive Director, Auto & Farm Sectors, M&M, in an email response to Autocar Professional.
It is a view that Neveen Munjal, Managing Director of Hero Electric, concurs with. “The EV industry in India will see a lot of collaborations, be it for charging, re-skilling of workforce, or for batteries. It is our strategy to partner with the best-in-class companies and build up capabilities from there and expand the market,” he elaborates.
Leverage strengths
The whole idea is to explore each other's strengths and leverage them to promote EV adoption in India, continues Munjal. “Such things take time and a lot of work has already been done in the back end before coming to this announcement,” he says. Work on the formation of the partnership has been going on for a while “even before the pandemic”.
From M&M’s point of view, says Jejurikar, the company will leverage its manufacturing capacity at Pithampur to manufacture scooters for Hero Electric as well as for product development. “Vehicles are currently under testing and full commercial production will begin in this calendar year,” he adds.
The plan is to manufacture 200,000 scooters to start with and then scale up. As already announced earlier, production will start with the Hero Optima and NYX electric two-wheelers. The pre-production trials of the two vehicles are currently underway at Pithampur and once they get completed, commercial production is slated to begin later this year.
“These two products are our best sellers. The Optima is the highest-selling Hero Electric model when it comes to the consumer business whereas the NYX brings numbers from the B2B segment. As we go along, we will add more product lines to this sub-manufacturing setup,” says Munjal.
According to Jejurikar, this partnership will enable development of the platform approach to help electrification of the M&M-owned Peugeot Motorcycles’ portfolio. This is expected to bring “significant value to both parties” through optimisation of costs, timelines, and shared knowledge. Peugeot Motocycles, he explains, has “ambitious plans” in the EV mobility space in several regions of the world, particularly in Europe and these developments will provide an option of adding to its EV product portfolio.
Munjal drives home the point that this partnership is a model where “we subcontract the manufacturing” of Hero Electric to M&M. It is an “arm's length” transaction that will allow the company to use the facility. “In due course of time, we will also be looking at jointly exploring new product development capabilities of both the companies,” he says.
The supply chain is being brought into place and teams are being set up to begin commercial production. M&M will also be investing in the tech upgradation of the facility and the investment will be amortised over a period of time. When it comes to new product development, it would be Hero Electric making the investments.
“Between Pithampur and Ludhiana, we would achieve 500,000 units annual capacity in CY2022 and we will build more capacities beyond these two locations as well,” says Munjal. He points out that there are three companies involved, including Peugeot, which come with “extensive automotive experience” and strengths including product development.
“We are going to use those strengths together to work on new products which are going to come under the Hero Electric stable,” he says. Asked if there is a possibility of Peugeot two-wheelers being rebadged for India, Munjal replies that nothing can be ruled out at this point in time even though the prime objective with now is to explore opportunities among all three companies.
“The idea is to build up from here and if it makes commercial sense, we will certainly go into that direction. There is a plan but we will open that up over a period of time. Right now, a lot of work is being done in the back end,” he says.
Conducive policies
Jejurikar is clearly bullish about the road ahead for electric mobility especially in the backdrop of “tremendous growth” seen last year thanks to “conducive policies” from the Centre and states.
“This has led to a hockey stick growth for the EV sector and we expect the electric 2W share to be in excess of 30 percent of the current internal combustion engine market by 2025-26,” he says. This will translate into annual output of six million units annually over the next three to four years.
The partnership is interesting because it marks the coming together of two distinctly different entities: one which is a pure EV player while the other has largely been in the internal combustion engine space for decades and is now keen to grow aggressively in the electric space.
M&M entered the two-wheeled arena many years ago when it bought out the Pune-based Kinetic’s business which was in dire need of a lifeline. This buyout fitted in with the former’s aspiration of becoming a mobility solutions provider where, beyond its core business of SUVs, it was keen on spreading its presence in cars (through a JV with Renault after exiting an earlier one with Ford), two-wheelers and trucks.
M&M further expanded its two-wheeler presence by creating Classic Legends where the idea was to revive legacy brands like Yezdi and Jawa and bring them back on Indian roads. Globally, Peugeot Motorcycles also became part of the M&M kitty.
Over the last year, the company has reiterated that it will stay true to its business of SUVs while electric will be another top priority. In fact, it was among the early movers in this space when it bought out Reva over a decade ago and went all out to boost sales of the e20. The electric play today is more focused on the pickup segment thanks to the growing e-commerce wave which gained traction during the lockdowns.
As for the recently forged alliance with Hero Electric, it is clear that both are betting big on the EV boom in India especially in two-wheelers. A whole lot of companies have thrown their hats into the ring and there is a heady mix of both startups and traditional players competing for a share of the pie.
Some like Ola Electric have turned on the decibel levels in this high voltage drama where the leadership stakes are obviously high. The company has announced some big plans both in production and a new retail model that promise plenty. Then you have the tried and tested warriors like TVS Motor and Bajaj Auto which are as aggressive in the electric space.
Hero Electric is a big player in the electric two-wheeler segment but needs to ramp up volumes quickly and this is where the partnership with M&M makes sense. It will be interesting to see if the two extend this to the pickup space and other mobility options.
The mood is also buoyant right now thanks to generous sops coming in by way of lower GST as well as from the Centre and states through FAME 2 and the like. However, it is not as if these can be doled out forever and this is when all participants in the EV game will face the acid test. This also puts in perspective why it makes sense to join hands rather than go solo — the spirit of coopetition where competitors can still collaborate will be the mantra going forward for two-wheeler makers.