Hero MotoCorp's Manufacturing Halt and Electric Vehicle Shift - Views on News from Equitymaster

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  • Apr 22, 2021 - Hero MotoCorp's Manufacturing Halt and Electric Vehicle Shift

Hero MotoCorp's Manufacturing Halt and Electric Vehicle Shift

Apr 22, 2021

Shares of Hero MotoCorp are in focus today after the two-wheeler maker announced a temporary halt in its manufacturing operations.

Hero MotoCorp has halted manufacturing at all its plants in light of the ongoing surge in spread of Covid-19 across the country.

The above shutdown, which is temporary and includes the global parts centre (GPC), is a first by a two-wheeler maker in this financial year.

The Delhi-based maker of Splendor stated it will utilise these shut-down days to carry out necessary maintenance work in the manufacturing plants.

Each plant and GPC will remain shut for four days, in a staggered manner between 22 April to 1 May based on the local scenario.

"The shutdown will not impact the company's ability to meet the demand, which has been impacted due to localized shut-downs in many states and production loss will be compensated during the remainder of the quarter", Hero MotoCorp said in a filing with the stock exchanges.

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The Electric Vehicle Shift for Hero MotoCorp

Hero MotoCorp also announced it has collaborated with the battery giant - Gogoro - to source technology for its future electric vehicles.

Gogoro is a global leader in urban battery swapping and smart mobility innovation which is based out of Vietnam.

Hero will bring Gogoro's battery swapping platform to India and both the brands will come together to produce Hero-branded electric two-wheelers.

The company said in a press note that its new partnership with the Vietnamese battery giant will be further used to 'extend the work' that's currently been done at its research and development (R&D) hubs located in India and Germany.

The brand also hopes to 'strengthen and expedite' the government's electrification drive with its new partnership.

Moreover, Hero MotoCorp is also hoping to make a 'significant impact' in the country's mobility and energy future.

Commenting on the new partnership, Dr. Pawan Munjal, Chairman and CEO, Hero MotoCorp, said, "Today marks another major milestone in our journey, as we bring Hero's leadership in two-wheelers, our Global scale and innovation powerhouse, with the leadership of Gogoro in Swapping business model, as they have demonstrated over the years in Taiwan and rest of the world."

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Equitymaster's View on the Electric Vehicles Shift in India

Speaking of electric vehicles, note that the power ministry has approved setting up 2,636 electric vehicle charging stations across 62 cities in 24 states.

Here's what Co-Head of Research at Equitymaster, Tanushree Banerjee wrote about electric vehicles in one of her editions of Profit Hunter:

  • 106 public and private entities have approached the government for permissions to set up about 7,000 EV charging stations.

    This clearly shows the vehicle manufacturers have enough incentive to capture this latent demand.

    The tax benefit in terms of a lower GST rate (at 5%) is a further shot in the arm of the EV industry.

As per Tanushree, electric vehicles are very much on their way to invading Indian roads. The threat of disruption in this era is something you cannot ignore.

Tanushree believes a company manufacturing lithium ion batteries for powering electric cars will be a key catalyst for the Rebirth of India.

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Resources from Equitymaster on the Electric Vehicle Megatrend in India:

Here are few more resources from Equitymaster on the electric vehicle megatrend in India and its implications for auto makers, auto industry, and the stock markets.

21st Century Oil is Key to Electric Vehicle Riches

A Pick and Shovel Investing Strategy to Ride the EV Megatrend

The Hidden Tesla in My Great Indian Wealth Project

Get Ready to Ride the Indian Electric Vehicle Megatrend

How Tesla Can Send Silver Zooming

How Stock Markets Reacted to Hero MotoCorp News...

Shares of Hero MotoCorp are trading marginally higher today.

Automobile stocks are trading on a mixed note today. The BSE Auto index is trading flat and the top gainers in the index are Tata Motors and Baja Auto.

The stock of Hero MotoCorp has touched a 52-week high of 3,629 and a 52-week low of 1,758.

On a YTD basis, share price of Hero MotoCorp is down 8.9% and over the past one year, it has gained 49.7%.

At the current price of Rs 2,831, the P/E ratio for Hero MotoCorp stands at 20.7 times.

About Hero MotoCorp

Hero MotoCorp Ltd (HMCL), formerly Hero Honda Motors Ltd, was jointly promoted by the Munjal family based in Ludhiana, Punjab, and HMC in 1984, and began manufacturing motorcycles in 1985.

In 2011, the joint venture (JV) partners separated.

HMCL has six plants in India: one each in Dharuhera and Gurugram, Haryana; Haridwar, Uttarakhand; and Vadodara, Gujarat, Chittoor, Andhra Pradesh and a global parts centre in Neemrana, Rajasthan with a combined manufacturing capacity of 92 lakh units per annum.

It also has a plant in Villa Rica, Columbia, and Jessore, Bangladesh with capacity of 1.5 lakh units per annum.

HMCL also has two R&D centres at Centre of Innovation and Technology in Jaipur and Hero Tech Center in Germany.

For more details about the company, you can have a look at Hero MotoCorp's factsheet and Hero MotoCorp's quarterly results on our website.

For more details about the auto sector, you can check out the automobiles sector report on our website.

You can also compare Hero MotoCorp with its peers on our website:

Hero MotoCorp vs Maruti Suzuki

Hero MotoCorp vs Tata Motors

Hero MotoCorp vs Bajaj Auto

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Monish Vora

Monish Vora is a keen student of the markets and shares his observations through his clear and concise commentary.

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