Monday, December 6, 2010

Hero and Honda to finally say good bye to each other and end the joint venture

It had been one of the few joint venture success stories in Indian automobile market. Hero group and Honda which started in 1984, is now said to be the world’s largest two-wheeler seller. But there has been reports of JV being revoked from both the sides for some days now.

According to agency reports, it was mentioned that Japanese company Honda Motor Co plans to sell its stake in India's top-ranked motorcycle maker, Hero Honda Motors and instead focus on its wholly owned subsidiary in the country. According to the Japanese Nikkei business daily

It was reported that the Japanese automaker may earn some 100 billion yen (1.2 billion dollars) from the sale of its shares in Hero Honda, founded in 1984 with India's Hero Group.

Honda and the Hero Group reached a basic accord this week to dissolve their partnership, Nikkei said, adding that they will seek final approval from their respective boards of directors later this month for the breakup.

According to the business daily report, Honda will sell its entire stake in the motorcycle maker to the Hero Group's founding family and investment funds by as early as March, and will no longer provide technical support to Hero Honda. Hero Honda sold 4.5 million Honda-brand motorcycles in the previous fiscal year, grabbing 48 percent of the growing Indian motorcycle market, the world's second-largest behind China. Hero Honda contributes roughly one-third of Honda's worldwide sales, but Honda reckons that it needs to have full control over operations to respond quickly to market changes, Nikkei said.

The report also mentioned that in future, Honda will focus its resources on wholly owned subsidiary Honda Motorcycle and Scooter India (HMSI), the fourth-biggest motorcycle maker in India, with sales of 1.2 million units. Honda plans to build a new factory in the southern state of Andhra Pradesh for HMSI, while speeding up its development of new sales outlets, Nikkei said.

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