The reason behind Hero and Honda's Separation

The Legacy of the Hero Honda alliance is something we all know about. But what happened that led to the breaking of 26 years of alliance?

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Beginning of Hero and Honda's Venture

Punjab's Ludhiana is where everything came to life. A still well-known company called "Hero Cycles" rose to power in 1956. The Munjal brothers established the bike business in 1975, and it quickly grew to become the biggest bicycle manufacturer in the country.

A joint collaboration agreement was inked in 1983 with Honda Motor Co. Ltd. in Japan. On January 19, the Corporation was incorporated in New Delhi. The company produces motorcycles with a capacity of up to 100 cc. Hero Cycles (P) Ltd. promoted the company (HCPL).

Nothing was able to stop "Hero Cycles" from capturing the interest of global automakers. The Honda of Japan followed in 1983. Both of the brands were top-tier in their respective countries. 

Hero and Honda were required to create agreements and contracts outlining their joint efforts. 1984 saw the birth of Hero Honda not long after they formed an agreement the following year.

Hero was chosen by Honda in India due to the size of its network and the calibre of its goods. Honda made the right choice, and by 2001 Hero Honda motorcycles had overtaken all other motorcycle manufacturers in the world.

The Firm and Honda Motor Co. Ltd., of Japan, agreed to a technical-financial cooperative agreement (HML). According to the terms of this partnership agreement, HML was required to provide all necessary technical information, know-how, trade secrets, and other pertinent data.

Hero Honda CD-100
 

It was the first 100cc four-stroke motorbike to be released in India. The lightweight design and good fuel economy are its best qualities. The CD-100 will have a 4-speed gearbox, LED speedometer, and neutral and flasher indicators, among other features.  

Journey and sales together

The CD100SS, a brand-new and improved motorbike from Hero Honda, was introduced in 1991. The company produced 5 lakh motorcycles in the same year, which was a significant milestone.

The Hero Honda Splendor, which replaced the CD100, entered the Indian motorbike market later in 1994 and quickly became a cultural icon.

The perception of the Hero Honda was altered in people's thoughts in 1999. The first motorcycle produced by the business to reach 100 km/h arrived. Many Indian houses now have a Hero Honda "CBZ".

Hero Honda made great strides in 2001 and released not one, but two motorcycles. The two Hero Honda models are Passion and Joy. But the Passion's new appearance was targeted at visually upscale buyers. Joy, on the other hand, was the Hero at the time who cost the least.

In addition to the introduction of new motorcycles, Hero Honda is recognised as the world's top motorcycle manufacturer in terms of the volume of bikes produced. The business continues to uphold the requirements.

The business introduced its first high-capacity motorcycle in 2003. Hero Honda Karizma was considered a high-speed tourer of the decade since it could reach top speeds of more than 130 km/h.

Hero Honda CD Dawn and Karizma were both provided by the corporation, and Splendor and passion also received minor modifications. Also, both of them were renamed Splendor+ and Passion Plus.

The Hero Honda "Ambition 135" motorcycle debuts in 2003, intended for premium commuter buyers. Hero Honda also developed two additions to its current motorcycles in the same year. The Hero Honda CBZ now goes by the name "CBZ Star" and has a new design.

Super Splendor, CD Deluxe, Glamor, and the redesigned Achiever were the four brand-new motorcycle models that Hero Honda unveiled in 2005.

In 2007, Hero Honda improved its products, giving them a stronger, more aggressive appeal that was more geared toward young people.

The "Hunk," a motorcycle of legendary power, was introduced by Hero Honda. The Splendor NXG was also introduced by the business concurrently.

2009 was the great automobile giant's silver jubilee year. Hero Honda celebrates its success by introducing the "Karizma ZMR," its newest and most potent motorcycle.

Because Hero was familiar with the Indian market and Honda was a pioneer in technology, the joint venture was successful. Hero lacked engineering skills despite leading the industry.

Honda would provide the blueprints, and the hero would put the bike together. There was no room for invention or ingenuity.

26 years of Alliance Break

After a 26-year Joint Venture, Hero and Honda Motors (Japan) decided to part ways in January 2011. Hero was not permitted to alter the layout. Also, it took three to four years to design products for the Indian market.

The hero became more irate as a result of this. On December 16, 2010, Hero Honda's board acquired Honda's 26% ownership interest in the Joint Venture. Hero hasn't looked back since that time. Hero created their capabilities entirely from scratch under the direction of Munjal's vision and meticulous scenario preparation.

Reasons for Dispute

Issue of exports:

The joint venture was only intended for local production and consumption, as stated in the shareholder agreement signed in 1984. Later, the agreement was changed to permit exports of specific products to Sri Lanka, Bangladesh, Nepal, and Columbia.

However, Honda was of the opinion that Hero Honda would have to compete on its own since it could not persuade its subsidiaries abroad to import the JV's products in 2008 when the topic of exporting the Indian JV's products to other countries came up.

The subsidiaries of Honda are run quite independently, and they choose which nations to purchase their goods from. For Hero Honda, this was a difficult pill to accept.

Board representation:

Hero Honda had no access to any of Honda's plans, but through the four Honda representatives on the board, Honda had access to all of Hero Honda's strategies and plans. Hero Honda considered this to be a conflict of interest.

Investments in R&D

Hero Honda intended to expand its business and move into the next growth phase, but Honda was hesitant to do so because it meant investing in its own R&D and manufacturing its own products.

Direct Competitor

Honda Motorcycles and Scooters India Pvt Ltd (HMSIPL), a Honda subsidiary in India, made the decision to enter the motorbike market in 2010, which accounted for more than 70% of Hero Honda's sales.

Hero Honda was concerned that the HMSIPL motorcycle would wind up as a direct rival to its two best-selling models, the Passion and Splendor. Additionally, this violated the conditions of the contract.

After Break Up

Hero's Split serves as a bridge between RIN and VRIN. Hero was left floundering in the ocean shortly after the separation because they lacked engineering skills. They assembled the bike using the design, merely acting as "copiers."

By recruiting the appropriate individuals and building the Centre of Innovation and Technology (CIT) in Jaipur, Hero intended to achieve key product development. The new product design, prototype manufacturing, testing, and validation facilities would be housed at the 850 crores Indian rupee (INR) Center of Innovation and Technology. (Rare)

The worldwide product strategy was developed and mapped out by Braunsperger, a 25-year BMW veteran, and Masson, a former Nissan executive. (Non-Substitutable).

Hero sought to bring together the wisdom and power of a seasoned business with the agility and zeal of a startup. The hero started to consider funding companies. At CIT, two of the building's eleven levels were devoted to innovation. 

Hero has a reservoir of gifted young people who were receptive to novel ideas, creative thinkers, and keen learners. Hero was assembling the ideal crew. Hero intended to release fifteen new bikes by March 2017 with thirty additional items already in the works. (Inimitable).

Hero MotoCorp was able to create the correct product with these qualities, at the right price, in the shortest amount of time, and with the confidence that it would hold up to the company's five-year warranty (Valuable).

Current Stats

With a 39% market share now, Hero MotoCorp is still the country's biggest two-wheeler manufacturer. In FY16, Hero MotoCorp sold 66.32 lakh units total, which included both motorcycles and scooters.

Their market value increased by 13% to Rs 58,823 crore. The number of scooters sold increased from 90,000 units in 2010–11 to 6 lakh units in 2015–16.

Industry Analysis

Domestic market share of these brands in 2022(%)

Brands	Market Share
Hero Moto Corp	34.51%
Honda Motorcycle and Scooters	24.83%
TVS	15.07%
Bajaj Auto	11.7%
Suzuki Motorcycle	4.04%
Royal Enfield	3.79%
India Yamaha Motor	3.58%

Hero MotoCorp Most selling bike of 2022 - The Splendor, a major model for Hero MotoCorp ever since its introduction many years ago, is the company's best-selling item. Hero MotoCorp sold 2,12,341 units in December 2022 as opposed to 2,10,122 units in December 2021, for a YoY increase of 3%.

Hondo Motorcycles Most Selling motorcycle of 2022 - The CB Shine was the company's best-selling motorcycle, despite the fact that Activa dominated sales for the two-wheeler manufacturer. In November 2022, the Indian division of the Japanese manufacturer sold 1,14,965 units of the CB Shine, compared to 83,622 units in November of the previous year.

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