Hero MotoCorp taps MG Motor's BaaS strategy to boost EV share; Choice sees 20% upside potential

Hero MotoCorp Ltd has unveiled its new electric scooter -- the VIDA VX2 -- introducing a Battery-as-a-Service (BaaS) model which aims at making electric two-wheelers more affordable and accessible. According to Choice Institutional Equities, this strategic move positions Hero as the first OEM (Original Equipment Manufacturer) in the two-wheeler segment to offer BaaS, potentially reshaping consumer adoption trends in the EV market.

The VX2 comes in two variants -- priced at Rs 59,490 (BaaS) and Rs 99,490 (with battery). The nearly Rs 40,000 price difference is expected to lower the entry barrier for EV ownership, particularly appealing to India’s large base of cost-sensitive consumers. "This affordability, combined with flexible pay-per-kilometre subscription plans, is likely to accelerate adoption among first-time EV buyers and daily commuters," Choice said.

The brokerage believes that this model could help Hero MotoCorp expand its EV footprint and gain near-term market share in the fast-growing electric scooter segment. Choice draws a parallel with MG Motor, which saw its EV market share in the passenger vehicle segment jump from 16.5 per cent in September 2024 to over 41 per cent by December 2024 following the launch of its own BaaS model.

Hero's commitment to building a comprehensive EV ecosystem is evident through its network of over 3,600 charging stations and more than 500 service points across India. However, Choice also noted that while the BaaS model may witness strong early adoption, it is unlikely to become a long-term standard unless the subscription plans evolve to suit a broader range of consumers.

"Our analysis suggests that for users with medium to high daily usage, the overall cost of ownership under BaaS may eventually exceed the benefits of the lower upfront cost," the broking firm added.

Still, the launch could push other OEMs to innovate and compete in the BaaS space. "If successful, this model may trigger a wave of competitive offerings and accelerate industry-wide innovation," the domestic brokerage said.

Maintaining a bullish outlook, Choice reaffirmed its 'BUY' rating on Hero MotoCorp with a target price of Rs 5,100, valuing the stock at 17x FY27E EPS.

Meanwhile, shares of Hero MotoCorp settled 0.28 per cent higher at Rs 4,240.75 on Wednesday, indicating a potential upside of 20.26 per cent based on Choice's revised target price.