Honda partnership with Hero Honda to break soon

After long discussion and process, the Japanese automaker Honda has been reported to end its Joint Venture with Hero Group. As per a report published by a Japanese business daily, both the partners have reached to a mutual agreement this week. The final approval is believed to come up end of this month after the consent of both the board of directors. The Japanese auto major is supposed to sell its entire 26 per cent stake in Hero Honda to Hero Group; as a result the former will have USD 1.2 billion. It is to be noted that the alliance came up in the year 1984 and dominated the two wheeler market for 26 years.

The process of selling the stake of Honda will take three months; however, Honda will have to give technical support till 2014 and will not be renewed further. Meanwhile, Honda is mulling over to set up its wholly-owned subsidiary, Honda Motorcycle & Scooter, that is certainly a big challenge for the Indian two wheeler major.

Note that, the Honda and Hero joint venture has sold 4.5 million two wheelers last FY that accounts for 48 per cent market share of the Indian two-wheeler market. It's current portfolio includes Hero Honda Splendor, Hero Honda Hunk, Hero Honda CBZ Xtreme, Hero Honda Karizma, Hero Honda Glamour, Hero Honda Achiever, Hero Honda Passion, Hero Honda Pleasure, Hero Honda CD Dawn, Hero Honda CD Deluxe. At present the company has three plants at Dharuhera and Gurgaon in Haryana and at Haridwar in Uttarakhand; the total capacities of the plants are 50 lakh two wheelers a year. Apart from that, it will have fourth production facility in the country. On the other hand, Honda motors has invested Rs 500 crore for its Bhiwadi plant in Rajasthan; it's total production capacity is 6 lakh units that will increase the total to 22 lakh units from all the plants. A third plant is also in pipeline.