Hero MotoCorp Announces Strategic Investment of ₹525 Crore in EV Start-up, Euler Motors

Hero MotoCorp, India’s pre-eminent two-wheeler manufacturer by volume, has signalled a determined foray into the burgeoning electric three-wheeler market through a substantial investment in Euler Motors. The company disclosed on Thursday a strategic acquisition of a 32.5% stake in the electric vehicle (EV) firm for an outlay of ₹525 crore. This development, as previously reported, underscores Hero MotoCorp's commitment to diversifying its presence within the evolving mobility landscape.

The investment in Euler Motors, a New Delhi-based entity engaged in the design, manufacturing, sales, and service of electric three-wheelers, will be executed through a combination of primary and secondary transactions. The primary component involves Hero MotoCorp acquiring equity shares and Series D Compulsory Convertible Preference Shares. This strategic move allows Hero MotoCorp immediate access to a rapidly expanding segment, where projections indicate that electric vehicles will constitute a significant portion of total sales in the near future, estimated by Hero MotoCorp at 35%.

Pawan Munjal, Executive Chairman of Hero MotoCorp, emphasised the significance of this investment, stating it as a "bold step towards realising our vision to be the future of mobility". He further highlighted the alignment of this inorganic expansion with the company's focus on sustainability and innovation. This move can be interpreted as a strategic pivot, especially considering the challenges Hero MotoCorp has faced in other diversification efforts.

Industry analysis suggests that Hero MotoCorp's entry into electric three-wheelers comes at a crucial juncture. While the company dominates the commuter motorcycle segment, its ventures into scooters and premium motorcycles have encountered headwinds. In the electric two-wheeler space, its Vida brand has reportedly experienced sluggish sales figures compared to competitors.

The electric three-wheeler market, however, presents a different narrative. Penetration of EVs in this segment has already reached a notable inflection point, with a significant proportion of passenger autos sold in India now being battery-powered. In 2024, overall EV penetration in the three-wheeler space (passenger and cargo) stood at a robust 56.6%, significantly higher than the 6.1% for two-wheelers and 2.4% for four-wheelers.

Euler Motors, established in the electric three-wheeler domain, has also recently expanded its portfolio to include electric commercial four-wheelers. This provides Hero MotoCorp with a stake in a company that is not only operational but also demonstrating growth, with a reported turnover of ₹172 crore for the financial year ending March 31, 2024.

This investment strategy reflects a multi-pronged approach by Hero MotoCorp in the EV sector, which includes prior investments in Ather Energy, the launch of its Vida sub-brand, and a partnership with Zero Motorcycles for electric technology. By acquiring a substantial stake in an established electric three-wheeler manufacturer, Hero MotoCorp appears to be accelerating its diversification into sustainable mobility solutions and mitigating the risks associated with solely relying on in-house development. The transaction, structured as a cash deal, is expected to be completed by April 30, 2025.

In a parallel development, Hero MotoCorp's board has also approved the establishment of a new company under Section 8 of the Companies Act, 2013, focused on its Corporate Social Responsibility (CSR) initiatives. This non-profit entity will be fully funded by Hero MotoCorp.

The investment in Euler Motors signifies Hero MotoCorp's intent to capitalise on the high growth potential of the electric three and four-wheeler market, while simultaneously leveraging existing adjacent business opportunities. It remains to be seen how this strategic move will impact Hero MotoCorp’s overall market position and contribute to its long-term sustainability objectives in the rapidly electrifying automotive sector.

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