Leading two-wheeler brand Hero MotoCorp (HMC) is in advanced negotiations to make a significant strategic investment in Altigreen Propulsion Labs, a Bengaluru-based startup specialising in electric three-wheelers (E3Ws), according to a report by the Economic Times.

This move could mark the Pawan Munjal-led firm’s entry into the rapidly expanding and fragmented segment, putting it in competition with Mahindra & Mahindra (M&M) and Bajaj Auto. Hero is expected to invest up to Rs 900 crore for a stake in the 11-year-old company, the report said, citing sources.

Hero-Altigreen deal: A win-win for both

Should the deal proceed, Altigreen would gain a major investor capable of helping it scale rapidly and expand its presence in key markets. For Hero MotoCorp, this investment would represent a diversification into the E3W segment, a market where rival Bajaj Auto has already established a foothold and which is dominated by M&M. Neither Hero MotoCorp nor Altigreen co-founder Amitabh Saran has commented on the potential deal so far.

If finalised, this would be Hero’s second significant investment in an EV manufacturer. The company currently holds a 40 per cent stake in electric two-wheeler maker Ather Energy, having invested Rs 124 crore in June for an additional 2.2 per cent stake. This funding round took place at a valuation of Rs 5,636 crore, up from Rs 4,666 crore when HMC initially invested Rs 140 crore in December of the previous year.

Altigreen, which identifies itself as a technology company, reported a turnover of Rs 115 crore and sold 2,800 units in the 2024 financial year. The company has been in discussions with Hero for nearly six to nine months. To date, it has raised $56 million (Rs 470 crore) between seed and Series A investments, although the valuation remains undisclosed. Series A was led by Sixth Sense and Xponentia and included contributions from Reliance Industries, Accurant (US), and Momentum (Singapore).

Altigreen to launch new models

Altigreen is expected to use the funds to launch new models, expand its reach, and achieve profitability, said the report, citing sources.

The company’s electric cargo three-wheelers are designed to address the last-mile delivery needs of e-commerce firms, as well as transport goods such as vegetables, dairy, poultry, and gas cylinders. Since its market entry in 2020, Altigreen has sold approximately 5,000 vehicles. In contrast, M&M sells 7,000 units per month, while Bajaj Auto sells 3,500 units per month.

Currently, Altigreen operates a network of around 30 dealers, with plans to increase this to 40 by the year’s end. The company has the capacity to produce 55,000 vehicles annually, according to its website.

Three-wheeler sales in FY24

In FY24, sales of internal combustion engine (ICE) cargo three-wheelers reached 121,506 units, while auto-rickshaw sales totalled 511,754, reflecting increases of 33.64 per cent and 61.5 per cent, respectively, according to the Federation of Automobile Dealers’ Associations.

Electric vehicle penetration in electric auto-rickshaws stood at 11 per cent in FY24 and is projected to reach 50 per cent by 2030. The penetration is expected to grow even faster in the cargo three-wheeler segment — from 14 per cent in FY24 to 55 per cent in FY30, as noted in M&M’s June quarter investor presentation.