Why Hero Motors Is Trailing In EVs

Hero Leads, Honda Closes In, But Both Are Losing Ground In EV Race

By Shubhangi Bhatia

What?

Nearly fifteen years after their partnership ended, Hero MotoCorp and Honda Motorcycle and Scooter India (HMSI) are locked in an increasingly fierce battle for India's two-wheeler crown, as the former’s dominance is facing mounting pressure.

Hero still leads, but Honda has dramatically closed the gap from 17.58 lakh units a decade ago to just 2.99 lakh units now, with parent Honda's Minoru Kato boldly declaring, "The number one position is well within our sight."

However, both giants are struggling in the EV race, where more agile rivals like TVS Motor, Bajaj Auto, Ola Electric, and Ather Energy have seized the early advantage. Hero's Vida brand is gaining momentum after a slow start, while Honda's EV debut has been so disappointing that the company has already halted production of its first two electric models.

Why?

The Indian two-wheeler market is undergoing its most significant transformation in decades, driven by recovering rural demand, the rise of premium motorcycles, and the inexorable shift toward electrification.

As one industry veteran observes, "While Hero has done creditable work with some of its models, its bread and butter remains the motorcycles from the Honda partnership era."

Meanwhile, Honda faces its own challenges, with another veteran noting that "Honda's DNA has always been technology, high value, and reliability. But over the last five to ten years, the focus has shifted toward managing the business rather than leading it."

Jay Kale from Elara Capital highlights another crucial battleground. "Premium motorcycles will be the key segment to watch as it is the highest growth category in the two-wheeler industry, and Hero's brand acceptance there remains a challenge,” he told The Core.

The post-pandemic landscape has fundamentally altered the competitive dynamics that both companies built their strategies around, forcing them to defend traditional strongholds while building credible positions in new segments.

Why It Matters?

Analysts suggest the battle represents more than a corporate rivalry. It is a preview of how traditional automotive powerhouses will adapt to the changing market dynamics or risk obsolescence. As Nomura's Harshvardhan Sharma told The Core, "The strategic question for both is whether they can convert legacy leadership into future-ready portfolio leadership."

With Hero planning an aggressive product blitz "quarter after quarter" and Honda expanding capacity to 8 million units by 2028, both companies are doubling down on their bets. But here's the catch: in a market where electric scooters are seeing strong growth, premium bikes are the fastest-growing segment, and rural recovery patterns are shifting, past success may not be enough.

The winner of this high-stakes game won't just dominate India's roads; they'll define the template for how legacy automotive giants navigate the new market realities. The question isn't whether change is coming; it's whether Hero and Honda can change fast enough to lead it.

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Markets reward certainty. Investors rarely get it.

That was the underlying thread at Navigating Market Risk, Tracking New Opportunities, held at The Quorum on 2 June, and moderated by Govindraj Ethiraj, with insights from Radhika Gupta and Navneet Munot.

The session brought together 70+ attendees for a sharp, closed-door conversation on how investors should think about volatility, diversification, global exposure, and long-term opportunity. It also marked the 6th event in The Core’s Breakfast Series and the 2nd event in the Navigating Market Risk series.

Gupta and Munot unpacked what it means to invest when volatility is no longer an exception but the default setting.

Gupta argued that the real test of a portfolio is not how it performs in calm markets, but whether it can survive turbulence. Diversification, liquidity, and position sizing, she said, matter more than chasing the next winning asset. Investing, after all, is personally not a competitive sport.

Munot took a broader view. The world, he suggested, has entered an era where uncertainty is continuous, cycles move faster, and information is abundant but increasingly difficult to interpret. Yet beneath the noise, long-term themes from AI and infrastructure to defence, supply chains, and climate resilience continue to create opportunity.

The shared message was simple: uncertainty is unavoidable. Preparation isn't.

We’ll be publishing the full video of the conversation this weekend.

7

That's India's new position in the global stock market rankings after South Korea overtook it, according to Bloomberg data.

By The Numbers: India's listed companies are now worth about $4.85 trillion, compared with South Korea's $5.01 trillion. The gap has pushed India down to seventh place globally by market capitalisation.

The Turning Point: Foreign investors have pulled $26.4 billion out of Indian equities so far this year, already exceeding the previous annual record of $18.91 billion. At the same time, corporate earnings growth has failed to keep pace with the lofty valuations many Indian stocks commanded.

The Bigger Picture: South Korea has emerged as a major beneficiary of the artificial intelligence boom. Chipmakers such as Samsung Electronics and SK Hynix have rallied on growing demand for AI hardware, helping lift the country's stock market.

India, by contrast, lacks large semiconductor firms that can directly benefit from the AI investment cycle, making its market less attractive to global investors chasing the trend.

Rate Hold Likely

The RBI faces a difficult policy decision this week as rising crude oil prices, a record-low rupee and concerns over a weak monsoon complicate the inflation-growth balance.

The Monetary Policy Committee, which concludes its three-day meeting on Friday, is widely expected to keep the repo rate unchanged at 5.25%, despite growing market speculation of future rate hikes. The RBI has already cut rates by 125 basis points over the past year to support growth.

Fast Facts: The sharp rise in oil prices following the Iran conflict has increased pressure on India's import-dependent economy, while the rupee has emerged as one of Asia's weakest-performing currencies this year.

Setup: RBI is expected to keep the repo rate unchanged for now, while adopting “a more hawkish tone — raising inflation forecasts, slightly trimming growth projections, and relying on forex tools to manage currency volatility,” Kotak Mahindra AMC said in a note.

Citi’s chief India economist Samiran Chakraborty said the RBI may have limited scope for a pre-emptive rate hike given the unusually high uncertainty and wide range of possible inflation outcomes, Reuters reported.

Fuel Prices Fan Inflation Fears

Petrol and diesel prices have been on the rise, and according to Crisil, further hikes may be on the way. Retail prices have risen by Rs 7.5/litre since May 15, and Crisil's Quickonomics report warns cumulative increases could approach Rs 10/litre in the near term, sending ripples across the economy through higher transport costs.

Context: Crisil estimates the direct impact on CPI inflation at 36 basis points (bps) at Rs 7.5/litre, rising to 48 bps at Rs 10/litre. Since fuel accounts for 42% of road transport costs and road transport handles nearly 71% of India's freight, rising fuel prices feed broadly into supply chains, lifting both food and core inflation.

Critical Moment: Despite CPI remaining below RBI's 4% target, Crisil projects it to rise. GST rationalisation announced in September 2025 offers a partial counterbalance across mass consumption items, but may not fully neutralise energy-driven pressures.

According to Crisil, the RBI's Monetary Policy Committee is expected to look through these supply-side shocks but will stay watchful of spillover risks to household inflation expectations and any generalisation of price pressures.

Critical Minerals Strategy

Gujarat Mineral Development Corporation (GMDC) will invest £600,000, or roughly Rs 7 crore, to develop India's first AI-powered Rare Earth Supply Chain Observatory in partnership with the University of Cambridge. The two-year project aims to strengthen India's ability to monitor and manage supplies of critical minerals.

Outcome: The observatory will use artificial intelligence to track global supply chains, monitor prices, identify potential shortages and assess geopolitical risks. GMDC expects the platform to help policymakers and businesses respond more quickly to disruptions in the rare-earth ecosystem.

The Turning Point: The initiative comes after Indian manufacturers grappled with supply-chain uncertainty following China's export restrictions on rare earth elements and magnets about a year ago. Rare earth minerals are essential for EVs, renewable energy equipment, electronics and defence systems, as The Core previously reported. The curbs last year triggered shortages across global industries and raised concerns among Indian automakers and electric vehicle makers that production could be affected if supplies remained constrained.

Auto Rally Faces Headwinds

India's auto sector is heading into FY27 with growing concerns over margin pressures as rising crude oil, aluminium, steel and rubber prices threaten profitability. The West Asia conflict has pushed up raw material costs, while higher diesel prices could weigh on the commercial vehicle cycle, Kotak Institutional Equities said in a note. Analysts expect these factors to create significant earnings headwinds in the first half of FY27.

Overview: Despite the challenges ahead, the sector delivered a strong fourth-quarter performance, aided by GST cuts, tractor subsidies and healthy demand across two-wheelers, passenger vehicles and commercial vehicles.

Auto OEMs reported robust revenue and earnings growth, supported by higher volumes, price hikes and lower discounts. However, the luxury vehicle segment remained under pressure amid weakening global demand, particularly in China and North America.

Setting: Domestic demand also supported auto component makers and tyre manufacturers, helping offset continued weakness in overseas markets. Profitability exceeded expectations as companies benefited from cost-control measures and operating leverage despite rising input costs.

Why Nvidia CEO Statement Sets Indian Markets Racing

On Episode 891 of The Core Report, financial journalist Govindraj Ethiraj talks to Anshuman Magazine, Chairman & CEO, India, SEA, MEA at CBRE.

• Why Nvidia CEO statement sets Indian markets racing

• Decoding the AI Investment Frenzy

• Assessing Inflation Impact of Rising Fuel Prices

• Why Jewellery Stores are Expanding Across India and What That Means for Retail