Hero MotoCorp Flags Emerging Risk: Fuel Efficiency Norms

Hero MotoCorp has become the first two-wheeler manufacturer to flag proposed Corporate Average Fuel Efficiency (CAFE) norms as an emerging business risk. These forthcoming regulations for motorcycles and scooters, due from April 2028, could escalate costs in India's highly price-sensitive market. The company, the largest player in the segment, is proactively addressing this by planning to integrate more lightweight components and enhance vehicle efficiency.

Furthermore, Hero MotoCorp aims to expand its electric vehicle (EV) portfolio to comply with the new standards. This proactive stance comes as the government prepares to implement fleet-wide fuel-efficiency targets for India's vast two-wheeler market. The company is engaging with policymakers through industry associations to advocate for realistic targets, highlighting that abrupt implementation could lead to increased compliance costs and penalties.

While CAFE norms have been in place for four-wheelers since 2017, their introduction for two-wheelers is a significant development aimed at reducing emissions and promoting energy security. Hero MotoCorp's substantial sales from entry-level motorcycles make the price sensitivity of this market a critical factor. The company's EV market share, currently at 3%, is lower than rivals Bajaj Auto and TVS Motor, underscoring the importance of its EV expansion plans.

Experts emphasize the need for careful sequencing of these norms, considering the impact on rural and cost-conscious buyers. The transition to EVs, with their inherently lower emissions, is seen as a key strategy for manufacturers to meet the targets and avoid penalties. Hero MotoCorp's recent efforts with its Vida VX2 electric scooter show promising customer reception and market share gains in select towns.