Hero MotoCorp is the world's largest two-wheeler manufacturer, dominating the Indian commuter motorcycle segment with roughly 86% share in 100cc bikes, while building positions in scooters, premium motorcycles, electric vehicles (VIDA), and exports across 52 countries. The money is made primarily from ICE motorcycles and scooters, where the company achieved a 17% EBITDA margin in Q4 FY26, versus an overall 14.7% margin for FY26 as EV losses and investments weigh on the blended result. With a point-of-sale presence in 93% of Indian talukas, a spare-parts business generating ₹6,200 crore in FY26, and leadership in entry-level bikes, the company operates a high-volume, high-barrier business model. Its scale and distribution create a cost advantage that most competitors cannot replicate, though scooters and EVs are more contested, with EV market share still small at around 5% of revenue. The persistence of the 100cc franchise and the gradual expansion into adjacent segments underpin the structural quality of the core ICE business.
The economics persist because of a distribution network that reaches nearly every town in India, a 25-year reign as the largest two-wheeler maker, and a brand that commands over 90% share in entry-level and commuter motorcycles. Switching costs are reinforced by the service network, dealer relationships, and the trust in Splendor's legendary reliability, while the company is the only one in India offering removable-battery EVs, addressing a key consumer concern around range anxiety. The parts business, currently servicing only about 50% of addressable demand, has headroom to grow by capturing gray-market sales, and the new global parts center with over ₹700 crore investment will more than double handling capacity. These are structural advantages that take years and billions of rupees to replicate, and they explain why Hero can sustain a 14-16% medium-term EBITDA margin even while funding an EV build-out that is still losing money per unit.
The inflection is the FY27 capacity expansion and new product pipeline that will reshape the business over the next 18-24 months. EV capacity is already at 30,000 units per month as of August 2026, up from 15,000 at the end of FY26, and management targets 45,000 per month before the end of FY27, a tripling within a year. Simultaneously, scooter capacity for top-selling models is being doubled, and a second global parts center in South India will more than double parts capacity. By FY28, the EV business could be generating well above the current ~₹660 crore quarterly revenue, with 100% PLI compliance targeted by December 2026, translating into a ~13% revenue benefit that should sharply reduce EBITDA losses, which already improved from ₹50,000 to ₹40,000 per unit quarter-on-quarter. Premium motorcycles, including the Harley-Davidson range, are set for multiple launches over the next 12 months, and exports, which grew 41% in FY26, are guided to keep expanding at over 40% annually as new countries open up.
Management has a mixed but improving walk-talk record. They promised to outgrow the industry in FY27 and maintained the 14-16% EBITDA margin guidance despite short-term headwinds; on the delivery side, ICE EBITDA margin hit 17% in Q4 FY26, exports grew 41% in FY26, and the company gained 230 bps in 100cc share and similar in scooters. However, EV share in monthly registrations slipped from a peak of 10.8% to about 7% in some months, and overall reported margins were held back by EV losses of around ₹220-230 crore per quarter, larger than originally flagged. Capital allocation is disciplined, with a ₹1,500 crore FY27 capex funded from operating cash flow (₹9,395 crore in FY26, up 80% YoY), a 70%+ dividend payout, and a small follow-on investment in a battery partner. The new CTO joined in May 2026, and the company is investing in AI for product development and customer conversion, indicating a focus on technology-led efficiency.
The earnings path over 18-24 months is clear: ICE margins should hold near 16-17% as price increases and LEAP savings offset commodity inflation, while EV losses per unit decline on scale, PLI coverage, and BOM cost reductions. If the EV business turns gross-margin positive on several models and reaches near breakeven by late FY27, overall EBITDA margin can move back toward the upper end of the 14-16% band, and revenue growth will be driven by 40%+ export growth, a doubling of EV volumes, and premium motorcycle launches. The single most important watchpoint is EV profitability: if PLI certification and scale do not bring losses down as fast as planned, or if commodity costs from the West Asia conflict persist, the medium-term margin guidance could be pressured. The tension between rising gross margins and lower PAT in recent quarters is operational, not structural, as it reflects transitionary commodity inflation and deliberate EV investment, both of which are expected to normalize over the next two years.
companyname: Hero MotoCorp Limited ticker: HEROMOTOCO sector: Automobile – Two-wheelers (Motorcycles & Scooters) Hero MotoCorp is the world's largest manufacturer of motorcycles and scooters by volume, a position it has held for 25 consecutive years (Annual Report FY26). Since incorporation in 1984, it has sold over 130 million two-wheelers across 50+ countries. The company operates eight manufacturing facilities: six in India (Dharuhera, Gurugram, Haridwar, Neemrana, Halol, Tirupati) plus plan...
Read the full report →capex, regulatory approval, new product segment, market share gain
FY27 industry volume growth guided at high single-digit with Hero planning to outgrow industry in motorcycles and scooters driven by capacity expansion, brand building, and new product launches
Guidance maintainedmixed
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