Hero Electric: The Rise, Fall, and Fight for Survival
Fifteen years ago, if you thought about an electric scooter, chances were that you had very few options to choose from. EV scooters were seen as a niche product, often used for short commutes due to their limited range and long charging times. Despite these limitations, they had a dedicated customer base, mainly in urban areas where daily travel needs were minimal. Among the early pioneers in this space was Hero Electric, one of India’s first brands to bet big on the future of electric mobility.
The electric two-wheeler market in India in FY 2015-16 saw around 20,000 units sold. Hero Electric led the segment with approximately 11,000 units, followed by Okinawa (3,000 units) and Ampere (2,000 units), while other smaller players contributed around 4,000 units. The market was still in its early stages, with limited consumer adoption and government incentives under FAME India just beginning.
But before we dive into Hero Electric’s journey, it’s important to understand the history of the Hero brand. The Hero Group, founded by Brijmohan Lall Munjal, initially made its mark in the bicycle industry before becoming one of India’s most dominant two-wheeler manufacturers. Hero Honda, a joint venture with Japan’s Honda, became synonymous with fuel-efficient motorcycles. However, in 2010, Hero and Honda parted ways, leading to the formation of Hero MotoCorp, which continued focusing on petrol-powered two-wheelers.
Meanwhile, Hero Electric, led by Naveen Munjal, emerged as a separate entity dedicated solely to electric vehicles. Unlike Hero MotoCorp, which continued its dominance in conventional motorcycles, Hero Electric positioned itself as a leader in India’s nascent EV space. It was among the first companies to introduce electric scooters to the Indian market, capitalizing on the demand for eco-friendly urban mobility solutions.
The EV Boom and the Rise of Competition
Fast forward to today, and the EV landscape in India has undergone a seismic shift. Government policies, technological advancements, and a growing environmental consciousness have propelled the EV revolution. Companies like Ola Electric, Ather Energy, Bajaj Chetak, and TVS have entered the market, offering advanced EV models that address key consumer pain points—faster charging, higher range, better design, and smart connectivity features.
Electric two-wheeler sales in FY 2015-16 and FY 2023-24. It highlights the massive growth in India’s EV market over the last decade.
- Hero Electric, a dominant player in 2015, saw minimal growth and now struggles with competition.
- Ola Electric, TVS, Ather Energy, and Bajaj Auto have emerged as major players in 2023, with significant sales figures.
- The market has shifted from a niche industry to a highly competitive sector with over 1.14 million units sold in FY 2023-24.
This showcases how innovation and adaptation have played a crucial role in the success of modern EV companies
While these new entrants pushed the boundaries of EV technology, Hero Electric struggled to keep up. Unlike its competitors, it failed to invest significantly in innovation. The company continued relying on its legacy models without making substantial improvements in battery technology, design, or smart features. As a result, its scooters began to look outdated in an industry that was rapidly evolving.
Challenges That Led to Hero Electric’s Downfall
- Lack of Innovation – While brands like Ather and Ola Electric introduced fast-charging technology, improved battery efficiency, and AI-enabled features, Hero Electric’s models largely remained the same. The company did not evolve its offerings to match changing consumer expectations.
- Government Crackdowns & Subsidy Issues – The Indian government’s FAME II subsidy played a crucial role in promoting EV adoption. However, Hero Electric, along with Okinawa Autotech, came under scrutiny for allegedly misusing these subsidies. This led to government investigations, refund demands, and eventually exclusion from subsidy programs—impacting both sales and credibility.
- Financial Struggles & Insolvency – As newer EV players gained traction, Hero Electric’s market share declined. Its sales plummeted from around 100,000 units in FY23 to just 11,500 units in the last fiscal year. Mounting debts and financial mismanagement led to insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) in December 2024. The company now faces over ₹301 crore in creditor claims.
- Changing Market Dynamics – When Hero Electric started, the EV market was small, and there were very few players. But in today’s competitive EV landscape, companies need to offer cutting-edge technology, aggressive marketing, and robust after-sales support. Hero Electric, unfortunately, failed to adapt.
Legal Challenges and Insolvency Proceedings
As Hero Electric lost market share, financial challenges began mounting. By the end of 2024, the company faced serious liquidity issues, culminating in insolvency proceedings.
The Insolvency and Bankruptcy Code (IBC) Angle
Hero Electric’s insolvency proceedings are being handled under India’s Insolvency and Bankruptcy Code (IBC), 2016, which provides a legal framework for resolving corporate financial distress. The IBC aims to ensure a time-bound resolution of corporate insolvency while protecting the interests of creditors, investors, and other stakeholders.
Key Legal Aspects of Hero Electric’s Insolvency Case
- Admission of Insolvency Proceedings The National Company Law Tribunal (NCLT) admitted Hero Electric into insolvency in December 2024 following a default of ₹1.85 crore. However, the total admitted claims from creditors now exceed ₹301 crore, with major claimants including Bank of Baroda, Kotak Mahindra Bank, South Indian Bank, and IDFC First Bank.
- Role of the Insolvency Resolution Professional (IRP) Upon admission of the case, the NCLT appointed an Insolvency Resolution Professional (IRP) to take over Hero Electric’s management. The IRP is responsible for:
- The Committee of Creditors (CoC) In Hero Electric’s case, banks and financial institutions hold 100% of the voting rights in the CoC, which has the power to approve or reject any resolution plan. If no viable plan is found, the company may face liquidation.
- Expression of Interest (EOI) and Bidding Process
- The IRP has invited expressions of interest (EOI) from potential investors.
- March 14, 2025, is the deadline for submissions.
- The final list of eligible bidders will be released on April 8, 2025.
- Resolution plans must be submitted by May 13, 2025.
- If a successful resolution plan is approved by the CoC and the NCLT, Hero Electric may be revived under new ownership.
5. Potential Legal Consequences
- Government Scrutiny & Fraud Investigations: The Serious Fraud Investigation Office (SFIO) has sealed Hero Electric’s premises and is probing the company for misuse of government subsidies under the FAME II scheme. The government has already demanded a refund of over ₹469 crore.
- Corporate Governance Failures: If allegations of financial mismanagement or subsidy fraud are proven, directors and top executives could face civil and criminal liabilities under the Companies Act, 2013, and the Prevention of Corruption Act, 1988.
The Future of EVs in India: A Booming Industry with Its Own Challenges
Despite Hero Electric’s struggles, the EV revolution in India is far from slowing down. The Indian government continues to push for electrification, and more consumers are now considering EVs as a mainstream alternative to petrol vehicles. In the next five years, one in five two-wheelers sold is expected to be electric.
However, challenges remain:
- Charging Infrastructure – Although battery technology has improved, charging infrastructure in India is still not as widespread as it needs to be.
- High Initial Costs – Even with subsidies, EVs remain relatively expensive compared to petrol scooters.
- Battery Performance & Recycling – Sustainability concerns related to battery disposal and recycling are growing.
Conclusion: A Lesson in Innovation and Adaptability
Hero Electric’s journey is a cautionary tale for businesses in a rapidly evolving industry. Being a first mover is not enough—companies must continuously innovate, adapt to market changes, and comply with legal and regulatory frameworks.
With its insolvency proceedings underway, the fate of Hero Electric now depends on the resolution process. The company may either find a new investor willing to revive it or face liquidation. Meanwhile, the broader EV market in India continues to surge forward.