Hero Motocorp Ltd.

Hero Motocorp Ltd., formerly Hero Honda, is the world’s largest two-wheeler motorcycle company, based in New Delhi.

The Company was started in 1984 as a joint venture between Hero Cycles of India and Honda of Japan. The company is the largest two wheeler manufacturer in India and is ranked #108 in the 2006 Forbes 200 Most Respected companies list.

• Hero Honda sells more two wheelers than the second, third and fourth placed two-wheeler companies put together.
• Hero Honda’s bike Hero Honda Splendor sells more than one million units per year.

In 2010, when Honda decided to move out of the joint venture, Hero Group bought the shares held by Honda. Subsequently, in August 2011 the company was renamed Hero MotoCorp with a new corporate identity. On June 4, 2012, Hero Motocorp approved a proposal to merge the investment arm of its parent Hero Investment Pvt. Ltd. into the automaker. The decision comes after 18 months of its split from Honda Motors.

The Beginning – Hero Honda

“Hero” is the brand name used by the Munjal brothers for their flagship company, Hero Cycles Ltd. A joint venture between the Hero Group and Honda Motor Company was established in 1984 as the Hero Honda Motors Limited at Dharuhera. Munjal family and Honda group both owned 26% stake in the Company.

During the 1980s, the company introduced motorcycles that were popular in India for their fuel economy and low cost. A popular advertising campaign based on the slogan ‘Fill it – Shut it – Forget it‘ that emphasized the motorcycle’s fuel efficiency, helped the company grow at a double-digit pace since inception. The technology in the bikes of Hero Honda for almost 26 years (1984–2010) has come from the Japanese counterpart Honda.

Hero MotoCorp Facilities & Bikes

Hero MotoCorp has three manufacturing facilities based at Dharuhera, Gurgaon and at Haridwar. These plants together are capable of churning out 3 million bikes per year. Hero MotoCorp has a large sales and service network with over 3,000 dealerships and service points across India.

The company offers a range of bikes starting from:

• CD Dawn,
• CD Deluxe,
• Splendor Plus,
• Splendor NXG,
• Passion and
• Passion Pro
• Hunk,
• CBZ X-treme,
• Karizma.

Company Performance

• During the fiscal year 2008-09, the company sold 3.7 million bikes, a growth of 12% over last year.
• In the same year, the company had a market share of 57% in the Indian market.
• On 1 June 2012, Hero MotoCorp reported its highest ever monthly sales at 5,56,644 units in May, registering a growth of 11.28%.

Termination of Honda Joint Venture

In December 2010, the Board of Directors of the Hero Honda Group have decided to terminate the joint venture between Hero Group of India and Honda of Japan in a phased manner. The Hero Group would buy out the 26% stake of the Honda in JV Hero Honda. Under the joint venture Hero Group could not export to international markets (except Sri Lanka) and the termination would mean that Hero Group can now export.

Since the beginning, the Hero Group relied on their Japanese partner Honda for the technology in their bikes. So there are concerns that the Hero Group might not be able to sustain the performance of the Joint Venture alone.

The Japanese auto major will exit the joint venture through a series of off-market transactions by giving the Munjal family—that held a 26% stake in the company—an additional 26%. The rising differences between the two partners gradually emerged as an irritant. Differences had been brewing for a few years before the split over a variety of issues, ranging from Honda’s reluctance to fully and freely share technology with Hero (despite a 10-year technology tie-up that expires in 2014), as well as Indian partner’s uneasiness over high royalty payouts to the Japanese company.

Another major irritant for Honda was the refusal of Hero Honda (mainly managed by the Munjal family) to merge the company’s spare parts business with Honda’s new fully owned subsidiary Honda Motorcycle and Scooter India (HMSI).

Future Outlook

• The company has a stated aim of achieving revenues of $10 billion and volumes of 10 million two-wheelers by 2016–17.
• Company aims to achieve this volume by supplying two wheelers in the countries where they could not sell previously, but are free to do so now after disengagement from Honda.
• Hero MotoCorp hopes to achieve 10 per cent of their revenues from international markets, and they expected to launch sales in Nigeria very soon.
• In order to cope up with the rising demand company decided to build their fourth factory in South India and their fifth factory in Western India which will be a major breakthrough for the company.

Thus it can be said that despite facing several tough issues due to disengagement with Honda, the company continues to have a bright future and is likely to achieve better results than expected in the years to come.

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