Hero Electric plans capacity expansion to five million units in five years

Leading electric two-wheeler maker Hero Electric is looking to expand production capacity to five million units in the next five years to meet growing demand for electric vehicles in the country.

In the first phase, the company will make operational production capacity to 500,000 two-wheelers at its facility in Ludhiana (Punjab) by the middle of next year. Thereafter, the company will set up additional capacity at a new location.

With fuel prices on a boil, the government revising upwards incentives available under FAME II, demand for electric vehicles have grown sharply in the first eight months of the ongoing financial year. “We're seeing as we call, the hockey stick growth. Demand across the country is skyrocketing. And so much so that you know at this point, we are not able to keepup with the demand”, said Naveen Munjal, managing director at Hero Electric.

Hero Electric is currently running at full capacity. The company is looking to sell 100,000 units in this fiscal year, up from 54,000 units in FY21.

The company is evaluating fresh capital it would require to raise to expand production capacity, launch new products to strengthen its presence in the country’s fast-evolving electric vehicle market.

“There is a lot of interest from the market to invest into the company. Also, for a company you know, you must continuously keep on pumping, fuelling this engine of growth, so to speak. And so, at some point of time, we will do another round also,” said Munjal.

Hero Electric raised around $30 million from Gulf Islamic Investments and existing investor OAKS Asset Management (formerly Alpha Capital) in the first part of its Series B round earlier in June 2021. “Now when we are going into hyper growth mode, in terms of volumes, our numbers will be very different. The scale that we will be looking at would be very different. So, its (Series B Part 1) not going to carry us for a very long time.”

In November, Ather Energy too said that it is setting up a second plant adjacent to its existing facility at Hosur in Tamil Nadu that will take up its total manufacturing capacity to 400,000 units a year from 120,000 at present. The company has said it will invest Rs 650 crores over the next five years to increase its production capacity to meet the growing demand for electric vehicles (EV).

To shore up volumes, Hero Electric is working on introducing multiple products in the local market every year. The company is additionally working at putting in place 300 sales outlets, to its existing network of 700 sales points in FY21. To ease consumer concerns over range anxiety, the company has inked agreements with Massive Mobility to set up more than 100,000 charging stations across the country over the next few years.

Apart from direct sales to consumers, Munjal also expects demand to grow manifold in the B2B segment. Hero Electric expects sales to the B2B segment to comprise 35% of overall volumes mid-term, up from 10% currently.

Separately, Munjal said the company’s stance on the use of the ‘Hero’ brand for eco-friendly remains unchanged and his businesses will take measures to protect its rights on the use of the brand ‘Hero’ on EVs. Hero Electric, run by Naveen Munjal, has claimed that only his branch of the broader Munjal family has the right to use the term ‘Hero’ for electric products, and no other family member has that right.

“We have the exclusive ownership of the brand ‘Hero’ for non-polluting, green and electric/environmentally friendly vehicles for personal or commercial use,” Munjal had earlier told ET. “We will take all appropriate measures to protect our rights in the brand and stop any violation of our rights in the electric / environment friendly vehicles segment. We have always worked as per the family agreements.”

The Pawan Munjal-led Hero MotoCorp is the market leader in ICE (Internal Combustion Engine)-enabled motorcycles and scooters and recently announced its foray into the EV segment. Hero MotoCorp has plans to launch its first EV in the fourth quarter of this fiscal.