The company’s cost structure has been spiralling upwards, affected by input cost inflation and higher labour, logistics, and advertising expenses amid intense competition. The advertising and promotion spending rose 22% in FY26 compared with 18% increase in FY25. Though the company raised product prices recently, it may not be able to fully cover the incremental costs. In addition, promotional costs are expected to rise further in the current fiscal year given the company’s push on launching new models. The company, however, believes the cost pressure is transitory. It has iterated the medium-term guidance of 14-16% for operating margin before depreciation and amortisation (Ebitda margin). It reported a 30 basis point expansion in the margin at 14.7% margin for FY26.
AgenciesIt’s a Long road: Input cost inflation and higher labour, logistics, and ad expenses are denting margins, but co believes pressure will be transitory
The company’s electric vehicles (EV) division, despite its growing market share and long-term relevance, continues to operate at a lower margin than the core internal combustion engine (ICE) operations. Hero Moto is in the investment phase for EVs with heavy spending on product development, network expansion and capacity build up. On a positive side, its EV losses are gradually narrowing on a per-unit basis as volumes scale up, costs moderate and benefits from incentive schemes increase, though the segment is still some distance away from turning profitable.
On demand front, Hero Moto enters FY27 on a firm footing, extending the recovery seen in the second half of the previous year. It expects the two-wheeler industry to grow at high single-digit in FY27, with scooters growing faster than motorcycles, aided by structural trends such as urbanisation, e-commerce and the gig economy. Hero MotoCorp expects to outperform the industry, supported by a strong pipeline of launches across scooters, premium motorcycles and EVs.
