A month after announcing its manufacturing facility in Columbia, Hero MotoCorp is all set to tap the potential of the South American continent and is finalising plans to set up a new plant in Argentina. According to certain sources, the top-level executives at Hero met the Argentinian government officials last month to finalise plans and will most likely involve a local partner in the process. Presently, Argentina is the second largest market in the continent after Brazil and tapping into the country will surely give Hero a major impetus in terms of growth within the region.
As part of Hero’s plans to have presence in over 50 countries, the new Argentina based facility will help the automaker achieve local growth as well as use the plant for export operations. The plant has been deemed necessary for the market in order to offer supply of products at effective prices. Local manufacturing is also important for Argentina, after the country imposed retractions on imports to maintain a positive trade balance. Hero plans to have manufacturing operations in over 20 countries by the end of this decade.
However, setting up a facility in the South American country isn’t as easy as it seems. The major problem remains with the volatile currency rate that may or may not work in favour of Hero. The second issue is justifiable sales to commence local production. In order to be sustainable, the manufacturer will have to ensure adequate volumes for the Argentinian market as well as for exports from the same facility. The market size for the two-wheeler market in Argentina stood at 7.5 lakh units in 2013.
With competitor Bajaj Auto’s presence in the market, it becomes even more necessary for Hero to launch its products in Argentina. Bajaj retails the flagship Pulsar, known as the Rouser as well as the Avenger cruiser in the country, while Latin America commands 19 percent of the company’s total exports. Apart from Argentina, Bajaj also has a plant coming up in Brazil, while the Columbia facility will see an investment of $70 million and will be Hero’s first fully-owned subsidiary overseas. The plant will start by mid-2015 with an initial capacity of 78,000 units that can be expanded to 1.5 lakh units in 3-4 years.
