Just a month after announcing its manufacturing presence in South America with a plant in Colombia, Hero MotoCorp is gearing up for an even bigger play in the continent. The country's largest two-wheeler maker is finalising plans to set up a bike plant in Argentina, the second-largest market in the region after Brazil.
Official sources told FE that Hero MotoCorp MD and vice-chairman Pawan Munjal, and VP (head, global business) Deepak Mokashi met Debora Giorgi, Argentinian minister for industry, last month to firm up its plans. Munjal had also visited Argentina in September 2013 to look for importers and distributors.
“During the meeting between the minister Debora Giorgi, and Pawan Munjal, the two talked about setting up a motorcycle plant in the country. The Argentinian government is upbeat about this project as it feels that a global player's investments in Argentina is not only going to benefit the country but the region as well,” said a source privy to the talks.
A Hero MotoCorp spokesperson confirmed that the meeting took place, though he declined to give further details like investments on the project.
A plant in Argentina will likely involve a local partner, as indicated by Munjal in an interaction with FE in June this year. “We will have a plant in Argentina because it's an important market in the region and we are in talks for that. However, there are many challenges, especially because of the volatile currency rate. To be sustainable, we will have to ensure adequate volumes both for the Argentinian market and in exports from the same plant,” he had said.
Local manufacturing is also deemed necessary in Argentina after the country in 2012 imposed restrictions on imports to maintain a positive trade balance. Incidentally, domestic rival Bajaj Auto already sells its Pulsar (branded as Rouser) and Avenger motorcycles in Argentina — Latin America accounts for 19% of Bajaj's annual exports. The motorcycle market size in Argentina stood at 7.5 lakh units in 2013.
The move comes after Hero announced a $70-million investment in its first wholly-owned overseas plant in Colombia in July. This plant will start by mid-2015, with an initial capacity of 78,000 units, scalable to 1.5 lakh units over 3-4 years. Hero is also planning a third plant in the region in Brazil currently. The company is also setting up assembly plants in Bangladesh, Tanzania, Uganda and Kenya, though these factories will be operated jointly with local partners.