In a first, Hero offers buyback for scooters

Now, you can own a two-wheeler for Rs 18.5 per day

Hero MotoCorp has launched a buyback scheme that offers resale price protection for five years for anyone buying a new scooter.

The move is aimed at reviving flagging scooter sales, said a top company official.

Called BuySurance, the scheme is the first of its kind in the two-wheeler market, claimed Sanjay Bhan, head, sales and after sales at Hero MotoCorp.

The maker of the Pleasure and Destiny models believes the scheme will reaffirm confidence in the market and help it to recoup market share and volumes in a segment where rivals Honda Motorcycle and Scooter India and TVS Motor Company have a head start.

“We are late entrants in scooters.  Others have been ahead of us. Not only do we have to catch up, we have to take a leap forward. This is something that will give us results,” said Bhan.

Hero has launched the offer in association with CredR, an online marketplace brand for pre-owned two-wheelers.

As part of the offer, buyers of new Hero scooters receive a guaranteed buyback certificate from CredR, with a fixed buyback value matrix every six months over the next five years.

To claim the benefit, customers have to contact Hero dealerships.

Besides a five-year warranty, depending on whether the scooter is being sold in the first, second, third, fourth or fifth year, the customer receives a fixed percentage of the ex-showroom price of the model that ranges from 57 per cent to 65 per cent.

For instance, if someone sells a scooter that has an ex-showroom price of Rs 50,000 in the third year in Pune, 60 per cent of this amount, i.e., Rs 30,000, will be paid out.

“The customer is actually spending Rs 20,000 over three years. That’s about Rs 6,666 a year, Rs 555 a month, Rs 18.50 a day.

"It will be even cheaper than the autorickshaw ride for which one pays Rs 14 for the first kilometre in Delhi,” said Bhan.

Bhan conceded that scooters had been an area of concern for Hero, which is why the company is taking such steps.

It is hoping the buyback scheme will yield significant gains in volumes and market share.

With the entry-level 100cc segment slowing, Hero is focused on the 125cc segment.

The launch of the Destiny 125cc is a step in that direction.

The model has been received well in the market.

Since the launch in November till March, Destiny has clocked 100,000 units in sales. Also in the works is a 125cc variant of the Maestro.

Hero’s ride in India’s competitive scooter market, a segment it entered in 2005 with Pleasure, has been anything but easy.

Over the years, it has launched a flurry of new models to wean buyers away from rival Honda, which commands over 50 per cent share in the segment, and other rivals, but the efforts have not paid off and it remains a distant third player.

If anything, the slowdown in the broader two-wheeler market - which started from August last year and gained momentum afterwards, following the higher outgo in the insurance premium and the liquidity crunch which followed the Infrastructure Leasing & Financial Services crisis - has hit scooter sales harder, as they are less fuel efficient than motorbikes.

In the year ended in March 2019, scooter sales in India, the world’s largest market for two-wheelers, skidded for the first time in 13 years.

When Honda’s volumes fell to 3,680,403, from 3,821,542 units a year ago, it was a drag on the industry volumes.

The fall for Hero was sharper, with volumes tumbling 16 per cent to 719,807 units, from 883,667 units in the same period.

Its market share dropped to 10.73 per cent, from 13.15 per cent, according to the data from the Society of Indian Automobile Manufacturers.

Hero ceded share not only to TVS but even to smaller rival Suzuki Motorcycle India, which saw its segment share increase to 9.18 per cent, from 6.27 per cent a year ago in 2018-19.

“The launch of the buyback offer on scooters, by virtue of being the first of its kind in the two-wheeler industry, may translate into volume and market share gains for the company,” said Mitul Shah, vice-president-research at Reliance Securities. Not everyone agrees.

“I expect a very small proportion of buyers to sell their scooters within a span of three to five years,” said an analyst at a domestic brokerage.

Considering that the offer is on the ex-showroom price and not on the on-road price, buyers will still have to invest 40-45 per cent more when buying a new scooter after selling the old one.

To test the market, Hero launched the offer in March in Pune, one of the big scooter markets in the country.

Encouraged by the response, it introduced the offer in Delhi last week and plans to take it to the top 10 metros over the next three months.

Photograph: Saumya Khandelwal/Reuters