Hero and Honda Break-Up Confirmed

by mahavir on December 4, 2010

It’s now confirmed that Honda Motor Corporation is exiting Hero Honda, the joint venture between Indian Hero group (Munjal Family) and Honda Motor Corporation of Japan. Earlier it was reported that the joint venture will break down but none of them (Hero group and Honda) commented on the break up issue.

According to Kydo, Japanese Nikkie business daily “Honda and the Hero Group have reached the basic agreement this week to dissolve the partnership,” Nikkei said, adding that the two companies will seek final approval from their respective board of directors later this month for the break-up.

However, the two companies, which renewed the agreement for technology support from Honda to the JV in 2004, will let the pact run till its expiry in 2014.

Honda will sell its entire 26% stake at US $ 1.2 billion (approx. 5,500 crore) to Hero group of Munjal family as early as March next year and will not provide any technical support after the expiry of technical agreement in the year 2014.

The deal was not taking place due to the price which Honda was asking for its stake. Honda wanted to close the deal at current market price where Hero group wanted to close the deal at 40% discount to its current price.

At current market price Honda’s stake is valued around Rs. 9,000 crore. As Honda agreed to sale its stake at Rs. 5,500 crore, it seems Honda has agreed on the price offered by Hero group. But in return Honda has increased the Royalty payment.

Though, much of details have not been disclosed publicly by both the company, according to CNBC TV 18 the rate has been hiked to 8% from current 3%. It also stated that the 8% for 3 new variants and not for entire product portfolio, but other sources stating that its for entire sales of Hero Honda.

If Hero Honda will pay royalty on entire sales, It will need to pay approximately royalty amount of around Rs. 2500 crore from current royalty amount of Rs. 500 crore. It seems like Honda has smartly closed the deal. We will have impact study once one of the company officially announces how the deal took place.

- Mahavir Kothari

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{ 40 comments… read them below or add one }

prikshit December 4, 2010 at 5:10 pm

ok now wait to see what will do by hero in india!!!!!

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bikeshunt.com December 4, 2010 at 5:10 pm

feeling sad to hear that a good partnership is going to end.

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Mahavir Kohari December 4, 2010 at 5:58 pm

Dear All,

Correction bo be made in Royalty Amount it’s Rs. 1,500 Crore annually instead of Rs. 2,500 crore.

Thanks,

Regards,

Mahavir Kothari

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skm December 4, 2010 at 6:03 pm

if the brand name of hero honda will change to hero then
how will be the bike are named
hero karizma zmr
hero cbz xtreme
hero passion
hero hunk
etc…

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Madhu December 4, 2010 at 7:48 pm

Hero group actually planning to name their bikes in bajaj way
thats
Karizma ZMR
CBZ Extreme
Passion Pro
Hunk
Splendor Pro etc……

felt hero wont sunk they will come as good as honda in terms of sales in india because earlier we seen tvs and suzuki breakup now tvs sales is above suzuki
in a similar manner i wish hero will come alone to battle against its rivals….

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Tushal December 5, 2010 at 7:55 am

But see the product line up from Suzuki and Honda. Honda would set the sales charts on fire if they come up with a Splendor type bike at 40K. This might not happen with Suzuki. Suzuki as a brand is neither consumer type like Honda or sports type like Yamaha. Its a balanced brand at least in India which is not helping them by any means.

Sachin December 4, 2010 at 10:32 pm

By the end of 2014 it will be zero karizma,zero cbz extreem,zero passion,& who knows may be even zero bicycle.

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Pritam Dhamde December 4, 2010 at 9:10 pm

Hey mahavir,plz let ur know aft breaking up wil there be honda name in HERO HONDA.or only hero.
Plz lukin frwd to hear u

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Mahavir Kothari December 6, 2010 at 12:58 pm

Dear Pritam,

Hero can use Honda name till it will pay royalty means 2014.

Thanks,

Regards,

Mahavir Kothari

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prabakar December 5, 2010 at 8:52 am

Hai every one,
And now the HERO will be a COMEDIAN without HONDA. They must make some engines of their own for cbz and highers. But any of their future engine ill be camparable wit HONDA’s quality and refinement. It ill take more years also.
On the other hand BAJAJ is growing fast for catching the creed “No.1 INDIAN” and they can do it effortlessly this time.
AM I RIGHT?

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Pritam Dhamde December 5, 2010 at 2:47 pm

@tushal.
Dont read dis if ur comparing gs wit fz.
I agree with dis dat suzuki is stil nt a consumer oriented comp.but I hope in future it wil be.
I dont agree with dis dat suzuki is nt sports like yamaha.
Suzuki has more premium bike dan honda n yamaha in india.
Busa,intruder,gixxer,bandit.
The sales figure has shown earlier in b.a.
Dat suzuki sold more superbikes dan yamaha.

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Tushal December 5, 2010 at 8:40 pm

You are talking about the other spectrum. Am talking about sub 1 lakh bikes which Hero Honda has a strong hold. That might be challenged by Honda with bikes in various price points. And am not talking about R1 or Fireblade or Gixxer. That guy mentioned about TVS sales being higher than Suzuki’s. So my answer was in that context and not with ref to 10L+ bikes :)

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Pritam Dhamde December 6, 2010 at 7:57 am

Hmmmm
Fine buddy

Tushal December 5, 2010 at 8:42 pm

But Hero would still have an option of tie up with somebody else as well. Who knows, some other manufacturer might cash in on the situation.

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fas December 5, 2010 at 7:43 pm

Well, Hero without Honda sounds funny but I am sure Hero will manage to bring out something awesome.

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SSJ December 6, 2010 at 9:52 am

Hi Mahavir,
In what ways these break-up would affect buyers… any thoughts?

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Mahavir Kothari December 6, 2010 at 1:01 pm

Dear SSJ,

Will write about that ones the terms of break up officially announced.

For more information read this one “Will Hero Honda Become The Next Indo-Japanese Joint Venture Break-Up Story”? in bike advice.

Thanks,

Regards,

Mahavir Kothari

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Scorpio December 6, 2010 at 12:29 pm

Lets Discuss in parts.. Request all of you to comment………………..

1. Problem 1: Hero (widout Honda name)
I feel Hero is strong brand; sounds more indian (this may be a problem)
But if good products keep coming, name will become stronger

2. Problem 2 : Market Understanding
I strongly feel that Market knowledge and Customer centric approach is
Strongest in Hero Honda among all 2-W mfrs.They know customers well.

3. Problem 3 : Technology
Yes, Honda is tech supplier to Hero Honda. But, 25 years in business,
Hero Honda would have done sthing to their R&D as well.
Option 2 is to buy out technology company from anywhere in world. Even Honda buys out technology from smaller co.s who have only R&D strength , no Mfring

4. Problem 4 : JV Business environment will be unamicable.
This may start a problem in all JV companies. Partners would start
distrusting each other. this is not good for general working/business.

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Krishna December 6, 2010 at 12:36 pm

There are some vehicles of Hero with their technology.
how many people remember Hero Panther, hero Majestic and Hero Puch. complete Indian Technology on Indian Roads. Definitely We will get some nice vehicles.

All the best

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Harry Aswal December 6, 2010 at 2:58 pm

I think this a very bad news for HERO HONDA’s costomer……..

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Tushal December 6, 2010 at 4:30 pm

Many are feeling sad, but why? Dudes, if Honda can bring bikes on its own, lets enjoy it. Why feel sad about it? If Hero wants to remain #1, they will do something on their own, or they would buy out some Euro Bike maker. Their balance sheet is rich enough to do it. We are not feeling sad about TVS or Bajaj. Same case with Hero. And Honda is having a stronger product line up than Suzuki or Kawasaki. So there is nothing to feel, everything to expect.

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Venkata Deepak December 6, 2010 at 10:42 pm

Its very sad, not to hear that the partnership has ended, but to see people commenting in such a way, that does not show any respect to “Hero” as an Indian company.

Lord Macaulay address to the British Parliament 2nd feb 1835.
“I have traveled across the length and breadth of India and I have not seen one person who is a beggar, who is a thief. such wealth I have seen in this country, such high moral values, people of such caliber, that I do not think we would ever conquer this country, unless we break the very backbone of this nation, which is her spiritual and cultural heritage, and , therefore, I propose that we replace her old and ancient education system, her culture, for if the Indians think that all that is foreign and English is good and greater than their own, they will lose their self-esteem, their native culture and they will become what we want them, a truly dominated nation.”

Lord Macaulay was 100% correct, and the English ruled and looted what all they want, we lost hell lot of things and the best thing we lost is the BACKBONE like what MR. Lord Macaulay has mentioned.
I am not asking you all to buy only “Hero” bikes or only Bajaj bikes, but do not abuse or talk negatively. If you do not like something in their products then mention as if there is a lot of scope to improve, but do not comment as if its fit for nothing.

Request All INDIANS to stop commenting negatively. Lets respect OUR country OUR companies, please guys. Lets encourage, lets motivate and lets do everything to make Indian companies be the best and remain the best at least in India. If you can not encourage, then please shut up, sit down and watch the movie, but do not discourage. If you do not like Hero bikes/cycles for some specific reason then help them improving them on those lines if you can, if not stop using those products, but do not discourage others.

All the Best to Hero.
Wish you all success in future and make all these Trojan’s to shut their mouth.

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soap_mactavish December 7, 2010 at 12:01 am

Mr Venkata, its nice to see people ready to die to for India. I suggest you join the Indian Army. Back to bikes, from a neutral piont of view, I donot see anyone buying a HERO ZMR against a YAMAHA R15 or a HERO CBZ against a HONDA Unicorn. The reason behind this is simple “HERO” sounds cheap, too Indian and a wannabe star. YAMAHA and HONDA has been setting the benchmarks in the biking community since their inception. I doubt it will change anytime before another 1000 years. Correct me if I am wrong. Its always survival of the fittest

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Tushal December 7, 2010 at 8:10 am

I have a small thought in my mind. Indirectly desi babus may make it sure that Honda doesn’t become a monopoly and that a indian brand remains #1 (Hero or Bajaj or whoever). Just a wild guess.

Venkata Deepak December 7, 2010 at 3:03 pm

@Tushal, My next bike would be either Honda CBR 250cc or Ninja for sure, But this does not mean that I abuse or comment negatively on Hero. If I love my bike I try to promote it, but I do not try to demotivate other people or talk negatively on any other product or manufacturer.
Do not expect Indian bike manufacturer to make a bike at international standards. If they do not meant it to export there is absolutely no use in making at international standards. Main idea of Indian companies is to meet the basic expectations of a normal Indian, rest all later. Is it worth investing lot of money in making a land rocket in Indian? especially in the places where traffic always jams? Definitely no. And again that does not mean that no one in India use land rockets.
Bikes with 100cc are enough for common man to fulfill their daily needs.
Any how this is my personal opinion.

GOPAL AMBORE December 20, 2010 at 7:39 pm

Dear Mr.Venkata Deepak ,

I am 100% agree with you. That we should encourage our Indian Culture , Indian Tradition, Indian products and Indian Companies like Hero Motors.

Thanx

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prabakar December 7, 2010 at 8:35 am

Hey everyone,
Remember onething after the break-up, hero will loose only on the higher cc. ie cbz, hunk, zma etc those are not a big sellers for hero. The real backbone of HERO is SPLENDOR and PASSION gotit. Most probably they will keep rolling their 100cc s without HONDA support. So ppls having CBZ,HUNK and ZMA are going worry about availability of genuine spares after some years. But 2 crore owners of splenders will not face any problems

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bobby December 7, 2010 at 4:03 pm

its not good. hero honda is the heart beat of india.(HERO HONDA, DHAKK DHAKK GO
)

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Depyan Boase December 7, 2010 at 5:17 pm

well guys….. everything that starts has an end… what more to say. best of luck HERO GROUP.

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ATULGOKU December 7, 2010 at 9:29 pm

Bajaj has a chance to be in the first position they have their own technology but the question is can they provide customers A…………………………………. Technology+ Relaiblty = SATISFACTION. BAJAJ Has to do some work with their Relaiblty.BAJAJ knows their Weakness is a simple Relaiblty Factor if BAJAJ achieve this factor. THEY HAVE INDIAN BIKE MARKET AND NO ONE CAN STOP THEM.

……….And on the other side Hero Group in all these YEARS they maintain Factor of Relaiblty and Honda has provided technology thats why HERO HONDA is on top. I think Bajaj has a better (or to say Easy) chance to survive if they not……….They are big FOOOOOOLS

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NITIN December 8, 2010 at 3:18 pm

After having 25 years experience, how can anyone thought about the end of HERO? They can use own technology or 25 years colloboration means they are also good in making and maintaining at joint ventures. So another world giant may roll in to Indian market with hero. Only thing that will be lost is the sentiment in the name HERO HONDA. Many Indians including rural, will only get HERO HONDA out of their mouth when the topic is motorcycles. Bajaj is always next to HERO HONDA.

In later years we may be used to only HERO or HERO DUCATI, HERO TRIUMPH,etc..!!!!!!

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Pankaj December 9, 2010 at 1:45 pm

I think that Hero group should have kicked Honda much before.
This just shows the greedy approach of foreign companies in India
first when they are new,they will look for a partner and after gaining some name in Indian market,they will throw away their Indian partner and start independently
I will still have confidence in Hero products.
Shame on the people who are abusing Indian brands and shamelessly staying in my country and purchasing foreign brands.
It is because of the selfish approach of people of today that our market is flooded by foreign goods.And Automobile market is the one where trillions of our Indian money goes to the pockets of foreign industrialists.
Just look at our surroundings,you will see many hungry and poor people,bad roads,basic facilities and infrastructure.So next time when you people see all this,dont complain because you are only responsible for this.
We are devoid of basic necessities and just think that you people who are abusing Indian brands are only responsible for that.
Think that if Indian people use Bajaj,TVS,Mahindra,Tata brands only,lot of our Indian money will stay in our country.Also many jobs will be generated in our country itself so no question even if Honda,Yamaha,Suzuki,Hyundai etc shuts down their units in India and go back to their own country.
I mean to say that Indian people has to realize what our country needs today.But sad to say that Every Indian says “What will I get” instead of “What will my country get”.This approach needs to be changed.
Democracy doesnt means that we are free to ruin our economy by buying foreign goods and abusing Indian made goods.
After lots of struggle our country gained independence but I swear that if our Indian people will abuse Indian goods,Again a east india company(this time really from east) is waiting for us.
Many people might say that it is globalization so what I am saying is old fashioned etc etc but globalization doesnt means that rubbish from developed countries should come in our Indian market.
When I was in Europe,I saw that in Germany,only Audi,Mercedes,BMW Volkswagen cars are the most and when I saw in France,though there are mercedes,volkswagen etc showrooms,in France I mostly saw Citroen,peugot etc french brands on roads.Seeing Mercedes in france was very rare
I think that this example is just enough to show that where people thinks about their country,the country is also developed to greater extent with all good facilities.

Why Honda,Suzuki,Yamaha etc are not concentrating only on 400 to 1300 cc bikes in India.
Our country also develops 100 cc to 500 cc bikes so whats new in buying 150 cc bikes of foreign brand and that too cheap and quality is nearly same as Indian product

Wake up before its too late

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Venkata Deepak December 9, 2010 at 7:21 pm

I appreciate you Pankaj. Pleople like you prove me that I am not all alone.

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shubham December 22, 2010 at 10:52 am

you really know how to create feelings about own country…i m with you

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Karthik.S October 31, 2011 at 9:11 pm

What you are saying is absolute non-sense.
This shows typical ignorant Indian thinking.
Every technological stuff we have now are obtained from abroad.
Not even a single 50cc vehicle is invented by indians. We learn all technology from foreigners and just applying and producing them in India. If these foreign company had attitude like you then we indians still have ridden horses. These so-called bajaj or Tvs are just implementing technology that learn’t elsewhere. A blind foolish Indian patriotism is good for nothing.

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Virtuoso December 9, 2010 at 3:13 pm

This was coming, every one saw it coming, just some aesthetic upgrades from HH for the past 5 years, we all new something was wrong.

It is sad in the sense that the brand name Hero Honda is gonna be extinct,it was kind of nostalgic whenever i hear about the name.

But in this fast era nothing is irreplaceable, expect tough competition ahead for the No:1 spot. Let’s stay tuned…

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ATULGOKU December 9, 2010 at 10:34 pm

I appreciate you Pankaj and Venkata Deepak WE are true INDIANS.Pankaj you have a strong point.I am really sure if we sell our indian PULSARS in japan no single japanese will bye that.Or a chinese. Indian costumers have to focus on our own country made goods.I think INDIA still is a golden BIRD for foreign companies.

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gaurav August 13, 2011 at 10:13 pm

i have made a project that cannot lose the hero company image in share market and the lose of the break of the partnership in between the hero and honda company

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kashif khan August 25, 2012 at 12:46 am

damn on u all who r creating a negative view,, i think evryone is forgetting that it was hero cycles only who gave its fingers to honda to walk on indian roads… n now it is hero motocorp. not a general store, if hero group hs come to dis decesion to breakup den it wud must hv proper strategy n strong enough to compete the competeters atleast in india…n i salute hero group to take dis initiative,,

Mashaallah.. i really feel proud for hero group that now he is purely indian..
n Inshaallah i will go for hero bikes…

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manjunath December 6, 2010 at 8:40 am

never under estimate Mr. Munjal he his a very powerful and most influential person in the indian auto indusrty he will defenetly do some wonders to retains his no.1 spot in the bike sgment

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