Hero, Honda dump yaari ki gaadi

The ubiquitous Hero Honda tag you saw on the bikes for the last 26 years will soon be history as the two partners have decided to end their joint venture, which has been nothing sort a corporate folklore in India

So what prompted the two firms to part ways after starting their JV in 1984 and launching their first motorcycle, CD 100, a year later, and which went on to command more than 50% market share of India’s motor cycle segment? The answer is: immense growth potential of Indian market. But if you wonder why now, the answer is, it’s only inevitable after the Japanese partner had set up HMSI in 1999 and forayed into scooters segment on its own with the launch of Activa and Dio, which went onto become hugely successful. This was followed by the launch of Unicorn, the first bike from HMSI’s stable, in 2004. And the writing on the wall was clear: it was only a matter of time before the two partners decided to call it a day.

Both the partners have different ambitions though (and, that is what they’ve said in the public). Honda, post-the break-up, which will be complete by mid-2014, will freely bring in new technology in India and pursue its growth plans independently in a market which is one of the most lucrative in the world, while Hero can tap new growth opportunities in overseas or export markets, which was not possible earlier due to the fact that Honda already is a significant player in such markets. The motorcycles segment continues to account for over 80% of total two-wheeler sales in India and grew at 24.1% — the best ever growth since 2002-03, according to Bajaj Auto’s latest annual report. Further, there is also a distinct shift in consumer’s preference towards bigger, powerful and sportier bikes which constitute the major chunk of India’s motorcycle market. The deluxe segment or in industry parlance Commuter DLX segment has grown from 48% of the market in 2005-06 to 64% in 2009-10 — or close to two-thirds of the total number of bikes sold while the share of the low-cost, Commuter STD motorcycles has fallen to 19% in 2009-10 from 43% of the market (in terms of volume) in 2005-06, according to the said annual report.

To quote Brij Mohan Lall Munjal, Hero Group’s patriarch and Chairman, Hero Honda, “Today is a new beginning to broaden our horizons.” While the news of separation must have brought cheers on the faces of rivals which long struggled to dethrone the mighty market leader for all these 26 years, let us wish the parting duo a happy ride and success.