Hero, Honda part ways after 26 years

India's Hero group and Japan's Honda Motor Co Thursday formally ended their 26-year-old association that had become the world's largest manufacturer of two-wheelers.
The Hero group will buy the 26-percent foreign stake in the Indian firm.

The pact calls for Hero Group gradually launching its own products in the Indian market, and the royalty being paid to Honda will gradually start coming down from January. The two groups, however, declined to give any financial details.

'The times have changed. The markets have changed. The vision has changed. This company wants to go beyond where it is today. This company wants to go beyond borders, it wants to do stuff which it is not supposed to do,' said Hero group's co-promoter Pawan Munjal.

'The royalty level will remain at the current level. But it will start coming down from January next year. Very soon all the current products we have in our portfolio will not have any royalty,' Munjal told a press conference to announce the divorce.

The names of the company and the name will be changed over time, Munjal said.

'Our joint venture agreement will be dissolved,' said Fumihiko Ike, Honda Motor Co's managing director for Asia and Oceania. 'Honda will grant necessary licence to enable continued production and sales of current products and licence for new products.'

The announcement came after the closing bell at Indian bourses Thursday, where the Hero Honda scrip closed 3.57 percent higher at Rs.1,679.10. But the stock has taken a major beating during the week, losing 9 percent, over fears of higher royalty to Honda.

The $3.5-billion Hero Group, which started operations as a small component company for the bicycle industry more than 50 years ago, is the largest manufacturer of two-wheelers in the world today.

The group, since it was established in 1956, has rolled out products such as Hero Cycles, Rockman Cycles, Hero Majestic Moped, Hero Puch 50-65 CC bikes, besides a wide range of motorbikes in colaboration with Honda.

The split between Hero and Honda is not new to the Indian two-wheeler market, with a spate of such break-ups in the past decade, some of which were due to restrictions imposed by the foreign collaborators on expanding into overseas markets.

These include the Chennai-based TVS splitting with Suzuki, New Delhi-based Escorts with Yamaha, Pune-based Kinetic with Honda, and Kanpur-based Lohia group with Piaggio.