Hero Honda to Remove “Honda” from its Flagship Products by June 2011

According to Economic times news World’s no. 1 two wheeler company Hero Honda is going to remove Honda name from its flagship products like Splendor and Passion by June 2011. The company wants to make its flagship products as individual brands, as Hero group has broken up with its 26 year old joint venture partner Honda Motor Corporation of Japan. The company has already started working on rebranding campaign. According to company official the rebranding process will start from April 2011.

When contacted company’s official spokesperson said “As stated in the recent past, the transition process is going to be smooth and gradual. Work is in progress with regard to new brand identity and related matters, which will be announced at an appropriate time. At this stage, we are not in a position to discuss the specifics.” According to company officials Hero group currently owns right for four products namely Splendour, Passion, Glamour and Hunk while Honda Motor Corporation of Japan owns right for CBZ and CD series. The bikes for which Honda Motor Corporation of Japan owns right will not be part of this exercise. Currently Splendour is world’s largest selling brand followed by Passion which sells nearly one million units a year.

According the new licensing agreement between Honda Motor Corporation of Japan and Munjal owned Hero group Hero Honda cannot use the Honda name if they make any kind of alteration in existing products. The new agreement allows Hero Honda to access the Honda technology till 2014. Apart from this Hero is also entitle to see new Honda models tills June 2017 but the royalty on this new products will be very high compare to current royalty rate of 2.7%.

As Hero Honda is now allowed to explore opportunities in export market after the joint venture brake up, the company is eager to rebrand its core product. Hero Honda is aiming to export in growing international market like South East Asia and Africa, Latin America. As these markets require little bit alteration in existing products, it has become obvious for Hero Honda to rebrand its products. The rebranding exercise is going to deteriorate Hero Honda’s profit margin in short term.

When asked about rebranding expense a company official said “We are also building a margin hit of 50 basis points in the financial year 2012 and 40 basis points in the financial year 2013, to take into account higher advertising and promotion expenses for rebranding in India and existing export markets and business development expenses for entry into new export markets under a non-Honda brand name,”.

It seems like Indian two wheeler industry is going to see a major change in upcoming days. This is the second announcement of separating parent brand from products and branding them as individual brand. Before this India’s second largest two wheeler manufacturer Bajaj Auto announced that the company will not use Bajaj name on its products from April 2011. Let’s wait and watch to see how this strategy works out for both the company.