Hero MotoCorp's Q2 Profit Jumps 42% to ₹1,861 Crore as Scooter Sales Surge 47% and Dispatches Rise to 18.68 Lakh Units

India's largest two-wheeler maker by volume has reported a strong quarter, helped by recovering rural demand, the start of the festive season and rapid growth in scooters, a segment where it has historically lagged rivals.

Hero MotoCorp reported consolidated profit after tax of ₹1,861 crore for the July-September quarter, up 42% from ₹1,308 crore a year earlier, according to Upstox on Thursday, October 29. Revenue from operations rose 23% to ₹14,971 crore from ₹12,218 crore.

The profit figure includes a gain of ₹397 crore from the equity consolidation of an associate company. Excluding that one-off gain, profit growth would have been considerably lower, though still positive.

Volumes and scooters

Hero dispatched 18.68 lakh motorcycles and scooters during the quarter, up 10% from a year earlier.

The standout was scooters. Sales rose 47% to 2.40 lakh units, a significant improvement in a segment long dominated by Honda Motorcycle & Scooter India, TVS Motor and, more recently, electric scooter makers such as Ather Energy and Ola Electric. Hero has historically been much stronger in motorcycles, particularly entry-level commuter bikes such as the Splendor.

Growth in scooters is important because the segment is popular in urban areas and among women riders, and it is where much of the transition to electric two-wheelers is taking place.

The rural recovery

Hero's business is heavily weighted towards rural and semi-urban India, where motorcycles are an essential mode of transport. Rural demand has recovered in recent quarters, supported by better farm incomes, government spending and lower taxes on two-wheelers following changes to the goods and services tax regime.

Electric ambitions

Hero has been building its presence in electric two-wheelers through its VIDA brand. It also holds a significant stake in Ather Energy, the Bengaluru-based electric scooter maker that recently reported its first quarterly profit.

The electric two-wheeler market has become fiercely competitive, with established manufacturers such as TVS Motor and Bajaj Auto gaining share from early leaders like Ola Electric. Hero's strategy combines its own VIDA products with its investment in Ather, giving it exposure to the segment's growth from two directions.

Cost pressures

Like other automakers, Hero faces rising input costs. Prices for steel, aluminium and other materials have increased, and high oil prices raise logistics costs. Revenue growth of 23%, ahead of volume growth of 10%, suggests that higher prices and a richer product mix contributed to revenue, offsetting some of the cost pressure.

Peer comparison

Hero's results come during a busy earnings season for India's automobile industry. Maruti Suzuki reported record sales but a 26% fall in profit, highlighting the cost pressures facing carmakers. Bajaj Auto's shares attracted buying after its results this week.

Two-wheeler makers have generally reported stronger results than carmakers, helped by the recovery in rural demand and lower price points that make two-wheelers more affordable.

The festive season

The September quarter includes the start of India's festive season, when two-wheeler purchases traditionally rise. Navratri, Dussehra and Diwali are considered auspicious times to buy vehicles, and manufacturers typically build inventory ahead of the season. Strong dispatches in the quarter reflect dealers stocking up for festive demand.

The December quarter will show whether retail sales during the festive season matched the strong dispatches.

Exports

Hero has been expanding its international business, exporting to markets in Latin America, Africa, South Asia and the Middle East. Export growth provides diversification, though some markets have faced economic and geopolitical challenges.

What it means for investors

Hero's results suggest that India's two-wheeler market is in good health, supported by rural demand and festive buying. The company's progress in scooters and electric vehicles addresses two long-standing concerns among investors about its dependence on entry-level motorcycles.

However, investors will note that the headline profit growth was boosted by a one-off gain, and will focus on underlying operating performance and margins.

The two-wheeler cycle

India's two-wheeler market is closely linked to rural incomes, which depend on agricultural output, government spending and wages. After several difficult years following the pandemic, two-wheeler sales have recovered as rural demand has improved, helped by good monsoons, higher crop prices and government welfare schemes. Hero MotoCorp, with its strong presence in rural India and in entry-level motorcycles, is one of the main beneficiaries of this recovery.

Urban demand has also been supportive, particularly for scooters and premium motorcycles. Scooters have gained popularity among urban commuters and women riders, and Hero's 47% growth in scooter sales suggests it is gaining ground in a segment where it has historically trailed rivals such as Honda and TVS.

Premiumisation

Hero has been expanding into premium motorcycles through its own brands and its partnership with Harley-Davidson, which produces the Harley-Davidson X440 in India. Premium motorcycles carry higher prices and margins, and the segment has been growing as aspirational consumers trade up. Success in premium segments would help Hero diversify beyond its traditional strength in commuter motorcycles.

The one-off gain

Investors should note that reported profit included a one-off gain of ₹397 crore. Excluding this gain, underlying profit growth was more modest, though still healthy. Analysts typically focus on operating performance, such as revenue growth and margins, to assess the underlying strength of the business.

What comes next

Hero will report retail sales for the festive season in the coming weeks, which will indicate the strength of consumer demand. Investors will also watch the performance of VIDA, the company's export growth and the impact of rising costs on margins. The broader trajectory of rural incomes, including the outcome of the monsoon-dependent harvest, will remain a key driver of demand for Hero's products.

Competition in electric two-wheelers

The electric two-wheeler market in India has become crowded, with established makers such as TVS Motor, Bajaj Auto and Hero competing against newer players such as Ola Electric, Ather Energy and many smaller brands. Government subsidies have shaped demand, and changes in incentive schemes have caused fluctuations in sales. Hero's Vida brand is seeking to gain share through a wider product range, more affordable models and an expanded charging and service network.

Analysts will watch whether Hero can convert its strength in petrol motorcycles into leadership in electric scooters, which will be essential to its long-term position as the market shifts.

Hero's next monthly sales figures, covering the peak of the festive season, will give an early indication of whether its strong momentum is continuing into the second half of the year.