Hero MotoCorp Introduces Voluntary Retirement Scheme For Staff
VRS is applicable to the entire staff of India's largest two-wheeler maker.
Hero MotoCorp Ltd. has introduced a voluntary retirement scheme for its staff as India's largest two-wheeler aims to build a leaner organisation amid gradual recovery from a multi-year slowdown and transition towards electric vehicles.
The voluntary retirement scheme has been designed to make the company "agile" and "future-ready", consolidating roles and "reducing layers to increase empowerment and agility", the company said in an exchange filing on Wednesday. "We expect this to improve efficiency within the company through a lean and more productive organization."
The VRS is applicable to its entire staff and offers a "generous package" that includes a one-time lump-sum amount, variable pay, gifts, medical coverage, retention of company car, relocation assistance and career, it said.
Hero MotoCorp is looking to streamline costs when India's two-wheeler industry has just about started to recover from a slowdown that began prior to the pandemic. Total dispatches hit nearly 1.6 crore in FY23, after slowing for three straight years. The sector and the budget segment, in particular, faces disruption as Indians are increasingly looking at battery-powered scooters as an alternative.
The focus on increasing efficiency and reducing costs has come at a time when the company is planning multiple launches at regular intervals over the next two years, including in the electric two-wheeler space.
"The industry is going through a paradigm shift to electric vehicles, which will make many of the employees redundant, as EVs need 30-35% less parts compared with an internal combustion engine-powered vehicle," said Puneet Gupta, director at S&P Global.
The transition will require a new set of talent and skills to remain competitive as the emerging EV players challenge the dominance of established two-wheeler makers.
"Reskilling can be part of the solution, but companies also need to hire new people while keeping the costs in check," Gupta told BQ Prime.
Hero MotoCorp is the dominant player in the entry-level motorcycle segment, which was the hardest hit when the industry volumes contracted over the last few years.
In fiscal 2023, the two-wheeler maker's dispatches to dealerships rose nearly 8% to over 53 lakh units.
Its retail market share fell to 32.1% in FY23 from 34.4% in the previous year, according to data from the Federation of Automobile Dealers Associations.
While Hero MotoCorp might be the first of the major auto manufacturers to come up with such a scheme, many more established players may follow to make their organizations fit for the new era, Gupta said.
