Presentation on Hero Honda Joint Venture

1
Presentation on Hero HondaJoint Venture

• By
• Ashish Agarwal
• Gunjan Singh
• Manish Chawla

2
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.
• In the mid-80s when the Indian government
  started permitting foreign companies to enter the
  Indian market through minority joint ventures.
• The entry of these new foreign companies
  transformed the very essence of competition from
  the supply side to the demand side.

3

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

4

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

5

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

6
The Deal Is Done.(June 1984)

• Honda agreed to provide tech. know-how to HHM and
  setting up manufacturing facilities. This
  included the future R D efforts.
• Honda agreed for a lump sum fee of 500,000 4
  royalty on SP.
• Both Partners held 26 of the equity with other
  26 sold to the public and the rest held to
  financial institutions.

7
Success Story

• HHM had grown consistently, earning the title of
  the worlds largest motorcycle manufacturer after
  having churned out 1.3 million vehicles in 2001.
• Worlds largest two-wheeler manufacturer with
  annual sales volume of over 2 million
  motorcycles.
• Owns worlds biggest selling motorcycle brand
  Hero Honda Splendor.
• Over 9 million motorcycles on Indian roads.
• Deep market penetration with 5000 outlets.

8
Success Story (Contd.)
9
Reasons for success

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

10
Some concerns

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

11

• Thank You