2. MILESTONE IN HERO & HONDA’S JOURNEY
1956
2000-2001
1984
1975
Hero Cycles Limited became the largest
manufacturer of bicycles in India
Hero Honda Motors Limited established
in joint venture with Honda Motors of
Japan, to manufacture motorcycles
Hero Honda emerges as the
market leader in motorcycles
with sales of over a million
motorcycles and a strong
market share of 47%
Hero Cycles Limited is established
1993
Hero Motors becomes India’s largest
exporter of two wheelers
3. WHY HERO & HONDA WENT FOR JOINT VENTURE ?
Wide distribution
network through
dealers
Better
Understanding Of
The Market
Dynamics
Cordial Industry
Relation
Focus On
Financial And
Raw Material
Processes
Salience Of Hero
Brand
Wide Experience
In Manufacturing
Of Vehicles
Commitment To
Quality
Engineering
Capabilities
Limited Options
With Honda
4. JOINT VENTURE
Honda would provide technical know how and assist in setting manufacturing facilities
Honda agreed for $500000 as one time lump sum fees and 4% loyalty
Joint Venture had 26% equity each with 26% to the public and rest with the financial institutions
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SUCCESS STORY
Hero Honda Motors had grown consistently, earning the title of the world’s largest motorcycle
manufacturer with annual sales volume of over 2 million
Every 30 seconds, someone in India buys Hero Honda's top-selling motorcycle – Hero Honda
Splendor
Over 9 million motorcycles on Indian roads
Deep market penetration with 5000 outlets
Company lead in both domestic two wheeler industry with nearly 48 % and motorcycle segment, with
the shares of 59%
5. CONCERNS & ISSUES
Announcement regarding formation of Honda Motorcycle and Bicycle India (HMSI) in
August, 1999
Hero Honda Motor Company stock plunged by 30 % on the day of announcement
Overlapping of products had already started - Honda Unicorn and Hero Honda CBZ
Extreme in 150cc segment, Honda Shine and Splendor Plus in 125cc segment
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Entry of new entrants increasing competition
REASONS FOR SPLIT
Higher Royalty Payments
Honda's reluctance to fully and freely share technology
Refusal of Hero Honda to merge the company's spare parts business with HMSI
Partners turning into Competitors
6. SPLIT
2011
In August Hero and Honda parted company, thus forming Hero
MotoCorp and Honda moving out of the Hero Honda joint venture
Paid 2,479.33 Crores for
assembly, manufacture,
selling, distribution and
exports licenses, which have
been amortized over a
period of 42 months up to
30th June 2014
Entered into a share transfer
agreement
Entire share holding of 26%
transferred to Hero, bringing
an end to the joint venture
2011
WHAT HERO DID?
Paid 2,479.33 Crores for
assembly, manufacture,
selling, distribution and
exports licenses, which
have been amortized over
a period of 42 months up
to 30th June 2014
WHAT HONDA DID?
Entered into a share
transfer agreement
Entire share holding of
26% transferred to Hero,
bringing an end to the
joint venture
7. REASONS FOR SPLIT
Higher Royalty Payments
Honda's reluctance to fully
and freely share technology
Refusal of Hero Honda to
merge the company's spare
parts business with HMSI
Partners turning into
Competitors
REASONS FOR SPLIT
Higher Royalty Payments
Honda's reluctance to fully
and freely share technology
Refusal of Hero Honda to
merge the company's spare
parts business with HMSI
Partners turning into
Competitors