Hero calls out 'regulatory complexity' amid MoRTH's push for safety

Mint

6 days ago

The country's largest two-wheeler company, Hero MotoCorp Ltd, has added "regulatory complexity" as one of the new key business risks at a time when the ministry of road transport and highways (MoRTH) is rushing the two-wheeler players to implement anti-lock braking systems (ABS) to increase safety.Hero said in its latest annual report that frequent regulatory changes increase cost and require process realignment, which is a concern for the company. The disclosure in the annual report came after a delegation of Society of Indian Automobile Manufacturers (Siam) members met the secretary of the road transport ministry on 9 July to discuss the implementation of ABS regulations.
Hero MotoCorp, TVS Motor Co. Ltd, Bajaj Auto Ltd, and Ather Energy are among the members of SIAM.
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The government has made ABS mandatory in all two-wheelers from 1 January to improve safety. ABS helps provide better traction during braking, reducing skidding and accidents. Currently, only two-wheelers with engines above 125cc are required to have ABS, which is about 16% of the two-wheeler market.
'Constantly evolving regulations require continuous adaptation, leading to increased compliance costs. Frequent regulatory changes may cause operational disruptions and require process realignment," Hero wrote in its annual report as part of key enterprise-level risks and their mitigation.
The company did not directly attribute the addition of this risk to the ABS proposal. Queries emailed to Hero MotoCorp remained unanswered till press time.
Cost escalation
However, the two-wheeler industry is concerned about the possible impact of the ABS regulation, which can lead to a ₹3,000 to ₹5,000 increase in the cost of a vehicle. At a time when the industry is expecting 5-6% growth in two-wheeler sales due to slowing demand, a cost increase can be a major challenge for the firm.
The minutes of the meeting accessed by Mint showed that during the meeting with the secretary on 9 July, the Siam delegation asked for more time to study India-specific accident data before implementing such regulations.
'The Secretary MoRTH stressed the urgent need for implementing safety measures, citing the high percentage of 2-wheeler fatalities, and emphasised technical interventions," the minutes further read.
According to analysts, Hero will face the biggest heat of the move as 94% of its total volumes does not have ABS. In a note on 20 June, analysts at Kotak Institutional Equities said that 94% of the company's total volumes will be impacted, which can lead to increased costs.
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This will come at a time when the two-wheeler sales of the company are in the slow lane in the domestic market, with sales growing 4% to 5.4 million units. In the first quarter of the current financial year, the sales in the two-wheeler industry declined by 6% to 4.6 million units.
Hero MotoCorp's sales during the April-June period fell by 12% to 1.3 million units.
'In terms of Original Equipment Manufacturers (OEMs), Hero MotoCorp and TVS Motors will be the most impacted, as 94% and 64% of their total volumes, respectively, will undergo price increases from CY2026. Bajaj Auto will relatively have less impact, as 35% of its volumes will only get impacted by ABS norms," Rishi Vora of Kotak Institutional Equities said.
While the industry is lobbying for relaxation in implementing such norms, not all players are on the same page. Ola Electric's chairperson and managing director, Bhavish Aggarwal, has argued for the quick implementation of the regulations to ensure customer safety.
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'Our stance is that the sooner the better. We should not compromise with customer safety," Aggarwal said during the company's earnings call on 14 July. 'For industry, when they do ABS, anywhere between ₹3,000 to ₹5,000, they incur in terms of Bill of Materials (BOM) cost, depending on what kind of ABS."Hero MotoCorp's mitigation strategies include 'proactive regulatory monitoring and active engagement with industry peers and regulators" to deal with regulatory complexity.