Hero MotoCorp Ventures into e-3W Market with Rs. 525 Crore Investment in Euler Motors

Hero MotoCorp Limited announced an investment of up to Rs. 525 crore in Euler Motors Private Limited, a key player in the electric three- and four-wheeler segment.

The investment in Euler Motors, to be executed in one or more tranches, marks Hero MotoCorp’s entry into the fast-growing electric three-wheeler category, where electric vehicles are projected to constitute 35% of total sales in the near future, according to Hero MotoCorp.

The Rs. 525 crore investment will consist of a mix of primary and secondary transactions. The primary investment will see Hero MotoCorp acquiring equity shares and Series D Compulsory Convertible Preference Shares, resulting in an approximate 32.5% stake in Euler Motors on a fully diluted basis. Additionally, Hero MotoCorp may purchase shares from existing Euler shareholders through secondary sales within the same investment amount. The transaction, structured as a cash deal, is expected to be completed by April 30, 2025.

Euler Motors specializes in designing, manufacturing, selling, and servicing electric three- and four-wheeler vehicles. With a presence in over 30 cities across India, Euler has demonstrated steady growth, reporting a turnover of Rs. 172 crore for the financial year ending March 31, 2024, up from Rs. 49 crore in 2023 and Rs. 25 crore in 2022.

Dr. Pawan Munjal, Executive Chairman of Hero MotoCorp, emphasized the significance of this move, stating, “Our strategic investment in Euler is a bold step towards realizing our vision to ‘Be the Future of Mobility.’ This investment reinforces our commitment to accelerated growth through both organic and inorganic expansion while highlighting the power of collaboration and adaptability in an ever-evolving market.” He further noted that the investment aligns with Hero MotoCorp’s focus on sustainability, innovation, and customer-centric progress, positioning the company to capitalize on adjacent business opportunities in the electric three- and four-wheeler market.

Euler Motors recently expanded its portfolio with the launch of its first electric commercial four-wheeler, complementing its established presence in the three-wheeler segment. This acquisition provides Hero MotoCorp a strong foothold in a rapidly evolving market segment, furthering its leadership in sustainable mobility solutions.

Hero MotoCorp, while dominant in India's commuter motorcycle segment, has faced significant challenges diversifying its portfolio. The company's attempts to expand beyond its core 100-150cc segment into scooters, electric vehicles, and premium motorcycles have yielded mixed results.

In the scooter market, Hero has struggled against Honda's dominance, failing to recapture the success it enjoyed during its Hero Honda partnership. Its Destini and Pleasure models have underperformed compared to competitors.

For premium motorcycles, Hero has relied heavily on strategic partnerships rather than internal development. The company invested in American manufacturer Erik Buell Racing (which later collapsed) and formed a partnership with Harley-Davidson for the Indian market. These moves highlight Hero's difficulty in organically building premium expertise.

In the electric vehicle space, Hero has taken a multi-pronged approach through investments rather than developing comprehensive in-house capabilities. The company has invested significantly in Ather Energy, launched its own Vida sub-brand, and partnered with Zero Motorcycles for electric technology.

These joint ventures and strategic investments reflect Hero's recognition of its limitations in developing new competencies quickly. While this approach reduces direct investment risks, it has resulted in slower diversification progress compared to rivals like Bajaj and TVS, who have more successfully expanded their portfolios beyond commuter motorcycles.

Establishment of a CSR-Focused Section 8 Company

In addition to its EV venture, Hero MotoCorp’s board approved the creation of a new company under Section 8 of the Companies Act, 2013, dedicated to advancing its CSR initiatives. This non-profit entity, yet to be incorporated, will be fully funded by Hero MotoCorp through cash consideration, with the company providing the entire subscription amount. While details such as the name and operational scope remain undisclosed, the entity will focus on social responsibility projects aligned with HMCL’s broader goals.

Post-incorporation, the new entity will be classified as a related party to Hero MotoCorp, though no promoter, promoter group, or group companies currently hold any interest in it beyond this relationship, the company clarified. The incorporation process will proceed subject to necessary governmental and regulatory approvals, though no specific timeline or cost details were provided in the announcement.