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Launches much awaited V1 e-Scooter under the Vida brand..

…positioned as a premium product, but plans to launch more products

* We attended HMCL's much awaited e-Scooter launch (Vida V1) and investor meet to discuss its electrification strategy. HMCL’s first e-scooter under the Vida brand is positioned as an aspirational brand at the top of the pyramid. The management aims to further launch products that would cater to all segments including B2B market. Key highlights from the meeting were:

* Vida V1 would be available in two variants - V1 Plus/V1 Pro (IDC range: 143km/165km) and would be priced at INR145k/INR159k (post-FAME subsidy) Pricing is at premium as it offers more features than most feature-rich products available in the market at present.

* HMCL is offering some of the industry-first features like custom drive mode, two battery packs which are detachable, buyback program, easy finance at cheaper ratesetc. . VIDA V1 features a Li-ion based battery (detachable), with a nickel manganese cobalt chemistry. VIDA V1 Pro/VIDA V1 Plus boasts of a net energy content of 3.94kWh/3.44kWh. Battery warranty stands at three years, or 30k km, whichever comes earlier.

* The Vida brand would also house the Vida platform and Vida services. Some of the unique features of this platform include: 1) assured buyback up to 70% of the Scooter's cost after a 16-18 month ownership, 2) an attractive finance scheme at a 1.5-2% lower interest rate, and 3) a three-day or a 72 hour test drive schedule.

* Company would initially launch the V1 in 3 cities (Bengaluru/Jaipur/Delhi), further ramping up to other cities and global launch. Bookings would commence from 10th Oct’22 with an initial token amount of INR2499. Deliveries would start from the second week of Dec’22 in these 3 cities.

* It has adopted multi-pronged distribution strategy, through experience centers, EV-specific dealerships, pop-up stores and pods in existing dealership. The management said it would also focus on the D2C model for distribution.

* At present, the penetration of e-2Ws in India is less than 5%, HMCL aims to expand this market. The management sees a lot of consolidation over the next three-to-five years and expects only those e-2W players that have efficiently deployed capital and cash on their balance sheet to survive. It plans to launch new products across segments (incl B2B) as part of its mid-term plan.

* Valuation and view: HMCL has positioned its Vida V1 e-Scooter as a premium offering, with product specifications comparable with the best in the business. It also offers several enablers like a buyback program, test ride of 72-hours, and lower interest rates. Product pricing could have been aggressive, but like other traditional OEMs (and Ather) it is priced rationally and is not based on pricing alone. Given the management's focus on serving all e-2W segments, launching a premium product would make it easier to expand down the price curve (rather than going up, if starting at the lower end of the pyramid), though it competes directly with its investee company: Ather. HMCL seems to be creating a much wider presence across segments (including B2B), with a dedicated team and several products under development. The current valuations (at 14.3x FY24E EPS) largely factor in all negatives: weak demand, market share loss, and low expectations from EVs. Any demand recovery (on very low base) and/or reasonable success to the EV launch can be a near-term stock price catalyst. HMCL is our preferred 2W play as it offers a pure play on a demand recovery in domestic 2Ws. We maintain our Buy rating with a TP of INR3,100 (15x Sep'24E EPS and INR163 for its NBFC after employing a holding company discount of 20%)

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