Presentation on

Hero Honda
Joint Venture
By: Ashish Agarwal Gunjan Singh Manish Chawla

The Market before JV

The license raj that existed prior to economic

liberalization (1940s-1980s) in India did not allow foreign companies to enter the market. In the mid-80s when the Indian government started permitting foreign companies to enter the Indian market through minority joint ventures. The entry of these new foreign companies transformed the very essence of competition from the supply side to the demand side.

What Was Hero Before JV. Hero Cycles manufactured Over 16000 Bicycles a day. They Sold about 86 million bicycles in aggregate as of 2002. They had nurtured an excellent network of dealers to serve Indias expansive markets. Over the years Hero Group had entered multiple business areas.

Some Facts About Honda. HMC initial plans called for both two-wheeler market and the electric generator market. HMC first chose Kinetic Engineering Ltd. And formed Kinetic Honda Motors Ltd. But this JV would work in field of Scooters Manufacturing. HMC came to Hero Group as the Last compromise choice for its motorcycle venture.

Honda selected the Hero Group for a variety of reasons, which included: Its engineering capability Relevance and salience of HERO brand. Distribution network. Commitment to Quality. Know-how and experience in handling large volume production and distribution. Tight focus on financial and raw material processes. Cordial Industrial Relations.

The Deal Is Done.(June 1984)

Honda agreed to provide tech. know-how to

HHM and setting up manufacturing facilities. This included the future R & D efforts. Honda agreed for a lump sum fee of $500,000 & 4% royalty on SP. Both Partners held 26% of the equity with other 26% sold to the public and the rest held to financial institutions.

Success Story
HHM had grown consistently, earning the title of the

worlds largest motorcycle manufacturer after having churned out 1.3 million vehicles in 2001. Worlds largest two-wheeler manufacturer with annual sales volume of over 2 million motorcycles. Owns worlds biggest selling motorcycle brand Hero Honda Splendor. Over 9 million motorcycles on Indian roads. Deep market penetration with 5000 outlets.

Success Story (Contd.)

Reasons for success

The deep penetration network of hero largely

benefited the sales. Absence of major competitors in initial years. Sound and proven technical capabilities of Honda and the reliability of Hero. Increased market for motorcycles:

Better Fuel efficiency. Change in peoples perception. Decrease in price difference with scooters.

Some concerns
In August 1999, HMC announced Honda

Motorcycle & Scooter India (HMSI) to initially make scooters and later, motorcycles as well. HHMs stock plummeted by 30% on the day of the announcement. JV with Honda Motors : A Question mark post 2004. Possible hike in royalty . Competition hotting Up. Recovery in the Scooter segment

Thank You