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Home arrow Alliances and Joint Ventures arrow Honda Motor Co and Hero Honda Motors Ltd forge a new relationship
Honda Motor Co and Hero Honda Motors Ltd forge a new relationship Print E-mail
Written by Anand   
Monday, 20 December 2010
New Delhi: Honda Motor Co., Bahadur Chand Investments, Hero Investments and Hero Honda Motors -  a Honda motorcycle production and sales joint venture company in India - agreed to and signed Memorandums of Understanding on a new relationship where Honda will sell all of the Hero Honda shares it currently holds, which is 26% of Hero Honda’s outstanding shares, to the Partners. With this, the Munjal family will control over 52% stake in the company.

Honda and Hero Honda will sign a new licensing agreement which enables Hero Honda to continue producing, selling and servicing its current products.

Hero Honda will change the company name. The brand name will gradually be shifted from the current ‘Hero Honda’ to the new original name. Honda will also grant new licenses for new products which will be produced and sold under the new brand name.  Hero Honda will continue to produce and sell its existing range of motorcycles. It can also use the Honda brand name on new models until 2014.

Hero Honda was established in 1984 with a 26% investment by Honda and 26% investment by the Partners with the purpose of developing the motorcycle market in India and started operation in 1985. The company located in New Delhi has a Capital Investment of Rs. 399.375 million and a Production Capacity of 5.4 million units annually. The remaining 48% consists of publicly-held stocks by other shareholders. The transaction,  valued at nearly USD 2 billion will take place in a phased manner and is expected to be completed next year.

In 2009 Hero Honda sold approximately 4.32 million units of motorcycles in India, a 23% increase compared to 2008.

"We would like to extend our sincere gratitude to our Partners who made possible Hero Honda’s growth to date," said Fumihiko Ike, Honda’s Managing Director and Chief Operating Officer for Regional Operations (Asia & Oceania).

"Our joint venture agreement will be dissolved, but our positive relationship will continue. And in order to assure service to the customers, Honda will grant the necessary license to enable continued production and sales of current products as well as a license for new products. I would like to take this opportunity to express our sincere gratitude to the Indian government and related authorities, the customers, and all our stakeholders who have supported Hero Honda’s growth to date. Honda wishes for the success of Hero Group. And Honda will continue exerting our efforts for our customers in India and for further development of the Indian market," he added.

Following the signing of the MOUs, a joint press conference was held in New Delhi, including Mr. Brijmohan Lall Munjal, the Chairman of Hero Honda, Mr. Pawan Munjal, the Managing Director and CEO of Hero Honda; Mr. Sunil Kant Munjal who represented the Partners; and Mr. Fumihiko Ike, Managing Director and Chief Operating Officer for Regional Operations (Asia & Oceania) of Honda.

Speculation is rife that emission norms, expected to kick in by 2015 for two-wheeler makers, is one of the reasons why Honda opted to end its 26-year-old alliance with the Hero Group.  Honda, which has invested heavily in making its two-wheelers more fuel-efficient, did not want to share the technology with Hero group.

"Once the transaction is completed, we would be free to develop our own R&D capability. We can also source technology globally," said Pawan Munjal.

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