Hero MotoCorp considers investment in electric three-wheeler startup

Hero MotoCorp (HMC), the leading two-wheeler manufacturer in India, is reportedly in the final stages of negotiations to make a significant strategic investment in Altigreen Propulsion Labs. Altigreen, a Bengaluru-based startup, specializes in the production of electric three-wheelers (E3Ws). This potential move would mark Hero's entry into the rapidly expanding and diverse E3W market, positioning it as a direct competitor to established players like Mahindra & Mahindra (M&M) and Bajaj Auto.

Investment Details and Implications

Sources familiar with the matter indicate that Hero is contemplating an investment of up to INR 900 crore (approximately USD 108 million) to acquire a stake in the 11-year-old company. The due diligence process has reportedly been completed, suggesting that the deal is in its advanced stages.

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Hero's EV Investment Strategy

This potential investment in Altigreen would mark Hero MotoCorp's second major foray into the electric vehicle sector. The company already holds a 40 per cent stake in Ather Energy, an electric two-wheeler manufacturer that is preparing for an initial public offering (IPO). Hero's involvement with Ather Energy has been substantial:

- In June, Hero invested INR 124 crore for an additional 2.2 per cent stake in Ather Energy.

- This investment valued Ather Energy at INR 5,636 crore, up from INR 4,666 crore during Hero's initial investment in December of the previous year.

Industry analysts view Hero's potential entry into the three-wheeler segment as a strategic move, noting that competitors Bajaj Auto and TVS Motor already have a presence in this market. The electrification trend provides Hero with an opportune moment to establish itself in this segment.

Altigreen's Profile and Market Position

Altigreen, which identifies itself as a technology company, has shown promising growth:

- FY24 turnover: INR 115 crore

- Units sold in FY24: 2,800

- Total units sold since market entry in 2021: Approximately 5,000

The company has previously raised $56 million (INR 470 crore) through seed and Series A investments. Notable investors include Sixth Sense, Xponentia, Reliance Industries, Accurant (US), and Momentum (Singapore).

Altigreen's e-cargo three-wheelers are designed to address the last-mile delivery needs of e-commerce companies and are also used for transporting various goods including vegetables, dairy products, poultry, and gas cylinders.

Electric Three-Wheeler Market Outlook

The electric three-wheeler segment is experiencing rapid growth due to several factors:

1. Favourable total cost of ownership (TCO) compared to ICE vehicles

2. Government incentives promoting electric vehicle adoption

3. Absence of permit requirements, unlike ICE three-wheelers

Market projections indicate significant growth potential:

- EV penetration in electric autos: Expected to rise from 11 per cent in FY24 to 50 per cent in FY30

- EV penetration in cargo three-wheelers: Projected to increase from 14 per cent in FY24 to 55 per cent in FY30

This potential investment by Hero MotoCorp in Altigreen Propulsion Labs represents a significant development in India's evolving electric vehicle landscape, particularly in the three-wheeler segment. It shows the growing importance of electric mobility solutions and the strategic moves being made by established automotive players to secure their positions in this rapidly changing market.