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Hero Officially spaced out with Honda

The 26 year live joint venture has come to an end for Hero, India’s leading two wheeler manufacturer and Honda, Japanese Motorcycle manufacturer.

Honda has around 26% stake in the venture Hero Honda. the 26% stake rest at a market value of Rs 8700 crore. The 26% stake is under plan to be acquired by Hero Group. With this big acquisition, the Munjal family will become largest share holder in the group Hero Honda.

The money what Honda will be receiving will be pumped into Honda Motorcycle and Scooter India which is a cent percent subsidiary of the Honda Japan. With so much amount of money pumped HMSI will expand its operation in India. HMSI plans to invest Rs 500 crore to build a production facility in Tapukara Rajasthan, this facility will be second Honda facility in Rajasthan producing six lakh units annually. When the facility becomes ready for production Honda will be producing at a combined capacity of 22.5 lakh units annually. Honda also plans to take help from its car division, Honda Siel Cars India, to supports its logistic operations.

Such kind of relation is obvious as two wheeler and four wheel Honda manufacturing plants stands adjacent to each other. Presently Honda enjoys fourth position in Indian two wheeler industry and HMSI is now eager to shake Hero Honda’s leading position. The big red has lined up some promising bikes for India; one of them is the most anticipated Honda CBR 250R to be launched in April 2011 followed by some commuter bikes for masses.

Hero Honda is aware of every Honda move; Munjals are ensuring that no stone is left unturned. Over the years Hero Group was solely dependent on the Honda to supply technology, for technology Hero gave heavy amount of royalties to the Japanese. Hero Group will now face its biggest challenge of establishing its own R&D facility.

Hero Group also has some bigger plans to maintain its market leadership. Hero will be setting up their fourth manufacturing facility to increase production capacity. Following Bajaj, Munjals will also exporting its units to South East Asia, Latin America and Africa to gain long term profitability.

Honda has also proposed their third manufacturing facility in Andhra Pradesh. This will be the manufacturer’s first plant in the South and after two other two facilities at Haryana and upcoming plant in Rajasthan. Total investment for this plant located in South accounts to Rs 1000 crore. On 100 acres of land the plant will be manufacturing 2,000 units per month, its capacity.

The Insights

Hero Group is too serious about maintaining its leading position after the venture gets void. To get stronger hold in Indian two wheeler segment Hero Group plans to launch a diesel powered motorcycle which will be in the 400cc segment. though Hero doesn’t has major treat from Honda but there is another Indian two wheeler giant just on the tail of Hero.

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