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Presentation on

Hero Honda
Joint Venture
By: Ashish Agarwal Gunjan Singh Manish Chawla

The Market before JV  The license raj that existed prior to economic liberalization (1940s-1980s) in India did not allow foreign companies to enter the market. .  The entry of these new foreign companies transformed the very essence of competition from the supply side to the demand side.  In the mid-’80s when the Indian government started permitting foreign companies to enter the Indian market through minority joint ventures.

What Was Hero Before JV.  They Sold about 86 million bicycles in aggregate as of 2002.  Hero Cycles manufactured Over 16000 Bicycles a day. .  Over the years Hero Group had entered multiple business areas.  They had nurtured an excellent network of dealers to serve India’s expansive markets.

And formed Kinetic Honda Motors Ltd.  HMC first chose Kinetic Engineering Ltd.Some Facts About Honda.  HMC came to Hero Group as the Last compromise choice for its motorcycle venture.  HMC initial plans called for both two-wheeler market and the electric generator market. . But this JV would work in field of Scooters Manufacturing.

Honda selected the Hero Group for a variety of reasons.  􀂃 Tight focus on financial and raw material processes.  􀂃 Commitment to Quality.  􀂃 Cordial Industrial Relations. .  􀂃 Know-how and experience in handling large volume production and distribution.  􀂃 Distribution network. which included:  􀂃 Its engineering capability  􀂃 Relevance and salience of HERO brand.

The Deal Is Done.(June 1984)  Honda agreed to provide tech.000 & 4% royalty on SP. This included the future R & D efforts. know-how to HHM and setting up manufacturing facilities.  Both Partners held 26% of the equity with other 26% sold to the public and the rest held to financial institutions. .  Honda agreed for a lump sum fee of $500.

. Deep market penetration with 5000 outlets.3 million vehicles in 2001. World’s largest two-wheeler manufacturer with annual sales volume of over 2 million motorcycles. Owns world’s biggest selling motorcycle brand – Hero Honda Splendor. earning the title of the     world’s largest motorcycle manufacturer after having churned out 1. Over 9 million motorcycles on Indian roads.Success Story  HHM had grown consistently.

Success Story (Contd.) .

 Increased market for motorcycles:    Better Fuel efficiency. .  Sound and proven technical capabilities of Honda and the reliability of Hero. Decrease in price difference with scooters. Change in people’s perception.Reasons for success  The deep penetration network of hero largely benefited the sales.  Absence of major competitors in initial years.

HMC announced Honda Motorcycle & Scooter India (HMSI) to initially make scooters and later.  Competition hotting Up.Some concerns  In August 1999. motorcycles as well. HHM’s stock plummeted by 30% on the day of the announcement.  Possible hike in royalty .  JV with Honda Motors : A Question mark post 2004.  Recovery in the Scooter segment .

Thank You .